Summary:
Indian stock markets witnessed a sharp decline as escalating Middle East tensions pushed crude oil prices higher and triggered a global risk-off sentiment. Weakness across global equities, continued FII selling and concerns over potential US Fed rate hikes further weighed on investor confidence. The broad-based selloff dragged benchmark indices lower, while volatility surged across markets.
There was a major fall observed in the Indian equity markets on Monday owing to heightened tensions in the Middle East, higher oil prices, the possibility of a Fed rate hike, and weak global markets.
The BSE Sensex fell by 821.73 points or 1.11% to 73,421.61, whereas the NSE Nifty 50 lost 286 points or 1.22% to touch 23,080.70. In addition to that, Bank Nifty dropped by 642.80 points or 1.18% to 53,853.45. There were losses across sectors, with Nifty Midcap 100 and Nifty Smallcap 100 indices losing over 1% each.
Nifty IT, Nifty Metal, Nifty Auto, and Nifty Realty indices fell by over 1.5%. However, there were gains registered by Nifty Pharma and Nifty Media. India VIX saw an increased level of volatility with a rise of 12% to close at 17.66. A total market capitalisation of ₹5 lakh crore was wiped out from the listed companies at BSE to fall down to about ₹456 lakh crore.
Global Market Rout Weighs on Sentiment
The weakness in domestic equities mirrored a sharp decline in global markets. South Korea’s Kospi plunged as much as 9% before recovering partially and remained down 4.8%, while Japan’s Nikkei fell 3.8% to 4%. Hong Kong’s Hang Seng slipped nearly 2%, and China’s CSI 300 lost 1.5%.
The selloff followed a major correction on Wall Street on Friday. The Dow Jones Industrial Average dropped 695.15 points, or 1.35%, to 50,866.78, while the S&P 500 declined 2.64% to 7,383.74. The Nasdaq Composite plunged 1,121.53 points, or 4.18%, to 25,709.43, marking its biggest one-day fall since April 2025 amid weakness in AI and semiconductor stocks.
US-Iran Conflict Pushes Oil Higher
Further deterioration was seen in investor mood as geopolitical tensions in the Middle East were on the rise. There were news reports that Israel had struck military installations in western and central Iran after an earlier strike in Lebanon. As a counter, Iran shot missiles at Israeli military installations, thereby risking a regional crisis and threatening peace talks altogether.
The geopolitical tension was accompanied by soaring oil prices. Brent crude futures increased by 3.5% to a range of about $96.5 to $97 per barrel. WTI crude witnessed gains exceeding 3% to reach levels of almost $94 per barrel. Since March, crude prices have increased by well over 50%. This is of concern to India, being highly dependent on oil imports.
Fed Rate Hike Fears and FII Selling Add Pressure
There was more uncertainty created due to better-than-projected job numbers in the United States. The job numbers increased to 172,000 in the month of May compared to the expected figure of 85,000, increasing the need for tighter monetary policy. The likelihood of a rate rise in the United States by December 2026 surged to 72.3%, up from 45.2% last week, as per the CME FedWatch figures.
The Foreign Institutional Investors continue to be sellers in the market for the sixth session in a row with sales worth ₹8,776 crore on Friday and close to ₹31,120 crore during the first week of June. The Indian rupee depreciated 17 paise and closed at 95.35 against the US dollar.
