US-Iran war jitters ease: What it means for the Indian stock market

Despite lingering uncertainty amid conflicting reports on the US-Iran conflict and reported negotiations, global market sentiment has improved since Tuesday after US President Donald Trump claimed that Washington and Tehran are engaged in talks to end the West Asia conflict.

According to an AFP report, Trump on Wednesday said that Iran was taking part in peace talks, and its denials were because Iranian negotiators fear being killed by their own side.

Meanwhile, reports suggest Iran has turned down a 15-point ceasefire proposal from the US, and instead outlined five counter-conditions, which include control over the Strait of Hormuz and war damages compensation.

Stock markets, however, have taken note of the diplomatic efforts of the US and have started discounting the possibility of the war ending in the coming days, which will lead to the reopening of the Strait of Hormuz, a critical waterway through which about 20% of global crude oil supply takes place.

How can an end to war impact the Indian stock market

The indications that the worst of the US-Iran war could be behind us cheered the market. The Sensex and the Nifty 50, equity benchmarks of the Indian stock market, have jumped by 3.5% each over the last two sessions, while investors have become richer by ₹16 lakh crore in the period.

According to experts, an end to the West Asian conflict may trigger a swift 1,000-point rally in the Nifty 50 in the near term.

"The Nifty may rise to 24,000-24,600 in the next few days if an end of the war is announced," said Rohit Srivastava, the founder and market strategist at Indiacharts.com.

Ajit Mishra, SVP of Research at Religare Broking, also has a similar Nifty target of 24,300 in the event of a formal announcement of the war's end.

The market rally may not be sustained, as the actual impact of crude oil volatility on corporate earnings remains to be seen.

Crude oil prices have remained above $100 per barrel for almost a month now. As India imports about 85-90% of its oil requirements, such a sharp spike in prices is expected to have a material macroeconomic impact.

Oil prices affect several industries, such as chemicals, restaurants and QSRs, tyres, OEMs, packaging, paints, and cement, as they raise production costs, eroding corporate profitability.

According to brokerage firm Motilal Oswal Financial Services, a $10 per barrel increase in crude could shave 30–40 basis points off GDP growth.

"While the base case assumes 7.5% growth in FY27 at $70 per barrel, sustained prices above $90 per barrel could push growth below 7%, as energy-intensive sectors face margin pressure and weaker demand," the brokerage firm noted.

Pankaj Pandey, the head of research at ICICI Securities, said that the Indian stock market may not be completely out of the woods.

"It is still too early to declare the crisis is over, largely because there is a lack of clarity regarding how long crude oil prices will remain elevated. The current sense is that oil prices are unlikely to drop significantly in the near future," said Pandey.

Pandey pointed out that many companies are currently operating using older inventory—materials purchased before the price spike. This has provided a temporary cushion, preventing immediate pressure on margins.

"If raw material and crude oil prices do not correct soon, the pressure on margins will become undeniable. At that point, analysts would need to revisit and likely lower their earnings forecasts and target prices for the market," said Pandey.

Overall, the market might be discounting the end of the war, but it cannot discount the impact of the war at this juncture. As oil prices remain elevated, experts believe the next few quarters will be challenging for earnings.

“If prices remain at these high levels for one or two more months, an earnings recovery will almost certainly be delayed, potentially shifting the recovery timeline into the second half of FY27,” said Pandey.

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Disclaimer: This story is for educational purposes only. The views and recommendations expressed are those of individual analysts or broking firms, not Mint. We advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and circumstances may vary.