🧭 The Iran–Israel War (June 2025)
Escalation began June 13, 2025 when Israel struck Iranian nuclear facilities and high-value targets—prompting Iran to retaliate with over 150 ballistic missiles and 100+ drones.
Israel also carried out covert Mossad drone sabotage and airstrikes inside Iran, targeting missile launchers and strategic infrastructure.
Humanitarian dimension: India launched Operation Sindhu on June 18 to evacuate over 110 Indians trapped in Iran.
🌍 Global & Regional Shift
- Beijing escalated the conflict; the U.S. increased its military presence and urged regional restraint .
- Oil markets reacted sharply: Brent crude flirted with >$75/barrel, with spikes of +5% amid supply fears.
📈 Impact on Indian Markets
Currency & Commodities
- ₹/US$ slid to ~86.48 (+0.3%), pressured by rising oil and geopolitical uncertainty.
- Crude prices up ~+$1–5/bbl, raising concerns about inflation and current account deficit.
Equity Markets
(Indian stock index performance)
- Mid June volatility: Sensex & Nifty dropped ~1–1.2%, hit by sell-offs in oil & gas, aviation, and financials.
- July rebound: IT and financials helped indices recover ~0.7–0.8% on June 16–17, buoyed by domestic buying despite global headwinds.
- Market mood now: Muted early on June 19: flat Nifty/Sensex; small/mid-caps mildly down (~–0.2 to –0.4%).
Sector-wise impact
| Sector | Effect |
|---|---|
| O&G / Aviation | Under pressure due to rising fuel costs and margin squeeze |
| Oil marketing cos | HPCL, IOCL, BPCL hit by crude cost rise |
| IT / Financials | Some rebound due to safe-haven flows and domestic investor support |
| Defense | Likely beneficiaries amid geopolitical tension |
| Paints, Autos, Airlines | Faces headwinds from cost inflation |
| Safe havens | Gold and bonds saw inflows as investors sought stability |
🛢️ 1. Oil & Gas (O&G)
🔻 Negative Impact
- Reason: Global crude oil supply fears due to war, Strait of Hormuz risks, and sanctions.
- Effect: Brent crude spiked toward $80–85/bbl, squeezing margins of oil-dependent sectors.
- Stocks hit: HPCL, IOCL, BPCL (OMCs); reliance on imported oil raises input costs.
- Upstream vs downstream:
- ONGC, Oil India (upstream) might benefit from higher crude.
- Downstream refiners and OMCs suffer margin pressure.
✈️ 2. Aviation
🔻 Strong Negative Impact
- Reason: Jet fuel (ATF) prices tied to global crude.
- Effect: Airlines see rising operating costs + fall in margin.
- Airlines affected: IndiGo, SpiceJet, Air India.
- Additional risks: Potential airspace restrictions, higher insurance costs.
🚗 3. Auto Sector
🔻 Mild to Moderate Negative
- Reason: Rising input costs (paint, rubber, plastic, energy).
- Specific pressure:
- Paint and tire manufacturers (Asian Paints, CEAT) hit by crude-linked raw material prices.
- OEMs (Tata Motors, M&M) may see input inflation + slower export demand if global sentiment weakens.
- Two-wheeler exports to Iran may be disrupted.
🖥️ 4. Information Technology (IT)
🔼 Mild Positive / Neutral
- Reason: Defensive nature of sector, global digital demand, and weak rupee supports export revenue.
- Effect: TCS, Infosys, HCL Tech gain moderate interest from investors seeking relative safety.
- Caveat: If U.S./EU tech spending drops due to global uncertainty, future growth could slow.
🏦 5. Financial Services / Banks
⚖️ Mixed Impact
- Positive: Domestic lending remains stable; DIIs support banking stocks.
- Negative:
- If inflation rises and RBI delays rate cuts, borrowing cost pressures may rise.
- NBFCs (e.g., Bajaj Finance, Muthoot) more vulnerable to liquidity shifts.
- Private banks (ICICI, HDFC Bank): Mildly positive on stable asset quality.
- PSU banks: Neutral to mildly negative due to macro exposure.
🏗️ 6. Infrastructure & Cement
⚖️ Mild Negative
- Input costs (fuel, steel, bitumen) rise.
- Infra projects may see delayed execution or cost escalation.
- Cement makers (Ultratech, Shree Cement) hit by energy prices (coal, pet coke).
🛡️ 7. Defense
🔼 Strong Positive
- Reason: Rise in global military tension = increase in defense budget & sentiment.
- Stocks in focus: HAL, Bharat Dynamics, BEL, Mazagon Dock.
- Support: “Make in India” + increased export demand to friendly nations.
- Some global investors eye Indian defense as a strategic proxy.
🏪 8. FMCG / Consumer Staples
⚖️ Defensive / Stable
- Reason: Non-cyclical demand, safe-haven during market stress.
- Minor pressure from raw material costs (packaging, transport).
- Key players: HUL, Nestle, Dabur – remain resilient.
💊 9. Pharma
🔼 Mild Positive
- Reason: Export-oriented, defensive in nature, weak rupee supportive.
- Stocks like Sun Pharma, Cipla, Dr. Reddy’s have global exposure.
- Caveat: Any disruption to supply chains (e.g., shipping lanes) may impact active pharmaceutical ingredient (API) flow from Iran/West Asia.
🛒 10. Retail & Discretionary
🔻 Moderate Negative
- Reason: Consumer sentiment may weaken due to inflation.
- Rising logistics and energy costs could squeeze margins.
- Stocks: Trent, Titan, DMart, Jubilant Food may see short-term caution.
📊 Summary Table
| Sector | Impact | Drivers |
|---|---|---|
| Oil & Gas | 🔻 Negative | Crude price spike, OMC margin pressure |
| Aviation | 🔻 Negative | Jet fuel costs, insurance risks |
| Auto | 🔻 Negative | Input inflation, demand uncertainty |
| IT | ⚖️ Stable/+ | Export demand, weak rupee support |
| Financials | ⚖️ Mixed | Rate sensitivity, inflation pressure |
| Infra & Cement | 🔻 Negative | Cost pressures |
| Defense | 🔼 Positive | Budget boost, investor interest |
| FMCG | ⚖️ Stable | Resilient demand, packaging cost issues |
| Pharma | 🔼 Positive | Global demand, weak INR benefit |
| Retail & Discretionary | 🔻 Negative | Sentiment hit, margin squeeze |
Other Watchpoints
- Foreign investors exhibited volatility—profit booking seen in past flare-ups, but domestic institutional investors (DIIs) have been steady buyers, offering support.
- Macro concerns: Oil-driven inflation could delay RBI rate cuts and widen the current account deficit.
- Trade & logistics: Possible maritime disruptions (e.g., Strait of Hormuz) threaten export logistics and add further economic uncertainty.
🧭 Summary
- Short term: Elevated volatility, cost-push inflation, sectoral divergences—risk-off sentiment hits oil-auto-aviation; IT, finance, defense relatively resilient.
- Medium term: Depends on conflict trajectory. Sustained oil >$80–90/bbl could hit margins, inflation, trade, rate policies.
- Indian response: Buffered by strong DII flows and focus on defensive sectors (pharma, FMCG)—consistent with expert advice.
✅ What Investors Should Consider
- Monitor oil prices & rupee: Key triggers for inflation and margin stress.
- Sector strategy: Consider overweighting defense, pharma, FMCG; reduce exposure to OMCs, airlines.
- Stay flexible: Watch FII flows and RBI commentary on interest rates.
- Safe-haven balance: Gold and bonds may provide stability amid volatility.