Mumbai, June 13, 2025: Indian equity markets experienced a sharp decline on Friday, with the BSE Sensex plunging over 1,100 points to 80,528 and the NSE Nifty50 falling 284 points to 24,608 by 9:19 AM IST. The downturn, which erased approximately ₹5.52 lakh crore in market capitalization, was triggered by a combination of global and domestic factors, primarily Israel’s military strikes on Iran, which escalated geopolitical tensions in the Middle East. Here are the four key reasons behind the market crash, drawing on insights from market analysts and recent developments.
1. Escalating Israel-Iran Conflict and Geopolitical Uncertainty
The primary catalyst for the market sell-off was Israel’s pre-dawn airstrikes on Iran, targeting nuclear facilities, ballistic missile factories, and key military figures, including the reported killing of Revolutionary Guards Chief Hossein Salami. Dubbed “Operation Rising Lion,” the strikes were described by Israeli Prime Minister Benjamin Netanyahu as a “decisive moment” to prevent Iran from developing nuclear weapons. Iran declared a state of emergency, with reports of potential retaliation via missile and drone attacks, raising fears of a prolonged conflict in the oil-rich Middle East. This escalation sent shockwaves through global markets, with Asian indices like Japan’s Nikkei (down 1.33%) and South Korea’s Kospi (down 1.17%) also declining. The heightened geopolitical risk prompted investors to shift toward safe-haven assets like gold, which surged 2% to a record ₹1,00,403 per 10 grams in India, and the U.S. dollar. Dr. VK Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, warned, “The economic consequences of this Israeli strike can be profound if the attack and counterattack by Iran linger long,” noting that Israel’s multi-day operation could further destabilize markets.
2. Surge in Crude Oil Prices
The Israel-Iran conflict triggered a sharp rise in crude oil prices, with Brent crude futures soaring over 13% to $78.50 per barrel, the highest since January 27, 2025, and WTI crude climbing 9.32% to $74.38. The spike was driven by fears of supply disruptions, particularly through the Strait of Hormuz, a critical chokepoint for 20% of global oil trade. JP Morgan analysts cautioned that oil prices could reach $120 per barrel in a worst-case scenario, though they noted a low probability of Iran closing the strait due to economic and political repercussions. For India, a major oil importer, rising crude prices threaten to widen the fiscal deficit and reignite inflation, which had eased to 2.82% in May, the lowest in over six years. Sectors reliant on oil derivatives, such as aviation, paints, adhesives, and tires, faced heavy selling pressure, with stocks like BPCL, HPCL, and IOC dropping up to 4%. Conversely, oil producers like ONGC and Oil India remained resilient, with ONGC being the only gainer on the Nifty50.
3. Global Market Weakness and Risk-Off Sentiment
The Indian market’s decline mirrored a broader sell-off across global markets, exacerbated by the Israel-Iran tensions and existing uncertainties from U.S.-China trade talks and potential U.S. tariff hikes. The MSCI Asia ex-Japan index fell 0.4%, while U.S. stock futures, including Dow Jones (down 1.5%), S&P 500 (down 1.6%), and Nasdaq 100 (down 1.7%), signaled a weak opening. The Indian rupee, the worst-performing Asian currency on Friday, depreciated 54 paise to 86.14 against the U.S. dollar, reducing returns for foreign investors and prompting sales. Foreign institutional investors (FIIs) have been net sellers, with recent outflows of ₹5,579 crore attributed to attractive valuations in Chinese markets following stimulus measures. The India VIX, a measure of market volatility, surged 7.33% to 15.13, reflecting heightened investor anxiety. Devarsh Vakil, Head of Prime Research at HDFC Securities, noted, “Indian markets took a hit as a combination of rising geopolitical tensions, trade uncertainty, and a tragic Air India crash weighed heavily on investor sentiment.”
4. Domestic Aviation Sector Shock and Broader Market Fallout
The tragic Air India plane crash in Ahmedabad on June 12, 2025, which claimed 241 lives, further dented investor confidence, particularly in aviation stocks. Shares of InterGlobe Aviation (IndiGo) and SpiceJet fell up to 4% in early trade, reflecting concerns about safety and operational risks in the sector. The crash, combined with rising oil prices, amplified selling pressure on aviation companies, which face higher fuel costs. The broader market also suffered, with the Nifty Midcap and Smallcap indices declining 1.1% and 1.5%, respectively. All sectoral indices opened in negative territory, with Nifty Oil & Gas (down 1.6%), Nifty Auto (down 1.16%), and Nifty PSU Bank (down 1.20%) among the worst hit. Major losers included Power Grid Corporation (down 1.84%), Adani Ports (down 1.75%), and Tata Motors (down 1.63%), while defensive sectors like IT showed relative resilience, with stocks like Tech Mahindra and Wipro trading in the green.
Market Outlook and Expert Insights
Analysts expect continued volatility as the Israel-Iran conflict unfolds. VLA Ambala, SEBI-registered Research Analyst, predicted Nifty support levels between 24,750 and 24,670, with resistance at 25,020 and 25,100. Vijayakumar added, “The impact on the market will depend on how long the conflict lingers. In the near term, the market will be in a risk-off mode.” The recent drop follows a broader correction since the Sensex’s all-time high of 85,978.84 on September 27, 2024, with large-cap stocks down 13.27% and mid-cap indices falling 13.58% over four months. Despite the downturn, India’s low inflation and the Reserve Bank of India’s rate cuts provide some cushion, though rising oil prices and FII outflows remain significant headwinds. Investors are advised to monitor developments in the Middle East and focus on defensive sectors like IT and select oil producers for stability.
Last Updated on: Friday, June 13, 2025 12:11 pm by Lokram Chittiboina | Published by: Lokram Chittiboina on Friday, June 13, 2025 12:11 pm | News Categories: News
About The Author
