Explained: How Iran–Israel war is melting stock markets and investor wealth — What should you do?

Escalating tensions in the Middle East, particularly between Iran and Israel, have triggered volatility in global financial markets, eroding nearly Rs 19 lakh crore of investor wealth in India within two weeks, according to data from BSE.

Market participants say geopolitical uncertainty and sharp swings in crude oil prices are weighing on investor sentiment, even as domestic economic fundamentals remain relatively stable.

Ashish Somaiya said investors should expect near-term volatility but view market corrections as opportunities if they have a medium- to long-term investment horizon.

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He shared his views in an interview with market expert Anil Singhvi.

Middle East tensions rattle markets

Rising geopolitical tensions involving the United States, Iran and Israel have led to uncertainty across global financial markets in recent weeks.

The conflict has heightened fears of disruptions in global oil supplies and triggered sharp movements in crude oil prices, which in turn have influenced equity markets worldwide.

In India, the market impact has been visible in the form of heavy wealth erosion. Data from BSE Ltd shows that investor wealth has declined by nearly Rs 19 lakh crore since late February amid heightened tensions in the region.

Volatility may continue in the near term

Somaiya said global conditions remain uncertain and markets may continue to witness sharp movements for some time. “We are not out of the woods yet. The global environment is still uncertain, and because of that, markets may continue to move up and down for some time,” he said.

He added that while domestic conditions in India have been improving over the past year, global developments continue to create headwinds for equity markets.

According to him, investors should be prepared for intermittent swings in the markets as geopolitical developments evolve.

Oil price swings adding to uncertainty

One of the biggest triggers for the current volatility has been sharp fluctuations in crude oil prices. Somaiya said predicting oil prices remains extremely difficult as they depend largely on geopolitical developments rather than company fundamentals.

“It is very difficult to predict oil prices. These are highly volatile and unpredictable, and they depend on global developments rather than company fundamentals,” he said.

Such sudden commodity price movements can create uncertainty for investors as well as for portfolio managers, particularly when key inputs such as oil or metals experience sharp spikes.

Global shocks have been seen before

Somaiya said similar situations have been witnessed earlier during global crises, including the Russia–Ukraine War, when crude oil prices had surged significantly. Despite such shocks, he said the Indian economy has shown resilience over the years.

“Oil prices are definitely a headwind for the economy, but in the last few years, we have seen that the Indian economy has matured and the impact has not been as severe as earlier,” he said.

He added that volatility caused by global factors should not necessarily be seen as negative for long-term investors.

Medium-term outlook remains positive

According to Somaiya, corrections in global markets, particularly in the United States, may eventually support capital flows into emerging markets such as India. “If there is some correction in the US markets, it is not necessarily bad news for emerging markets. In fact, it could lead to better flows into markets like India,” he said.

He noted that the Indian market has already undergone a long period of consolidation despite improvements in economic indicators such as earnings growth, policy support and macro fundamentals.

“After such a long phase of time correction, the medium-term outlook becomes stronger,” he said. Somaiya added that investors who take advantage of corrections could see significant upside over the next 12 to 18 months.

What should investors do?

Somaiya advised investors to remain disciplined and avoid reacting to short-term volatility. He said investors should refrain from making aggressive lump-sum investments in the current environment and instead stagger their investments.

“In the current situation, investments should be staggered over the next three to six months rather than investing aggressively in one go,” he said. He also advised investors who are already investing through systematic investment plans to continue their investments.

“If investors continue their systematic investments and remain patient, the benefits could become visible over the next 12 to 18 months,” Somaiya added. He emphasised that market returns often come in phases and patience remains key for long-term wealth creation.

Stock Markets Snapshot

Equity markets have witnessed a sharp decline over the past five days amid rising global tensions and volatility in crude oil prices. The benchmark BSE Sensex has fallen 2,393.01 points or 3.01 per cent to 77,157.86 during the period.

The broader Nifty 50 declined 615.75 points or 2.51 per cent to 23,957.20. Banking stocks remained under pressure, with the Nifty Bank dropping 2,932.30 points or 4.98 per cent to 56,008.35 in the past five days.

Sectorally, the Nifty Auto index slipped 1,078.75 points or 3.98 per cent to 26,027.15, while the Nifty Oil & Gas index declined 0.84 per cent over the past week and is down 6.63 per cent over the past one month.