Will Middle East conflict dampen Dalal Street’s rally? Here’s what experts say

The Indian stock market has enjoyed a six-day rally despite the ongoing conflict in the Middle East, leading many to question whether this trend will continue or if the geopolitical tensions will finally halt the upward momentum.
As investors keep a close watch on the situation, experts are offering insights into how the conflict might affect Dalal Street in the days to come.
Despite the uncertainty arising from the Middle East conflict, Indian stocks have surged, with benchmarks like the Sensex and Nifty showing strong gains.
Over the past six sessions, the Indian market has added significant value, boosted by strong corporate earnings and global factors like steady foreign inflows. However, many investors are now concerned that the conflict could create a drag on the market’s performance.
Geopolitical events, such as conflicts and wars, often lead to sharp reactions in stock markets around the world.
The uncertainty surrounding these events tends to make investors cautious, resulting in volatility. While short-term disruptions are expected, historical data indicates that markets typically recover once the initial shock fades and a clearer picture of the economic impact emerges.
Vinayak Mehta, Founder of The Infinity Group, commented on this aspect, saying, “Geopolitical tensions can trigger immediate volatility in global stock markets, primarily due to the uncertainty they introduce. Markets often react sharply, with declines as investors seek clarity on how these events will impact economic stability and growth. However, markets tend to recover over time as the initial fear subsides.”
He further advised investors to stay calm during such periods.
“For investors, it’s crucial to avoid reacting impulsively during these periods. Diversifying investments across various sectors and geographies can help cushion the impact. A measured, research-driven approach to investing, coupled with long-term goals, can mitigate the potential adverse effects on portfolios.”
One area where geopolitical conflicts are likely to show an immediate impact is the energy sector. With the Middle East being a major oil-producing region, any conflict can drive up oil prices. This, in turn, could affect various sectors, especially energy and commodities, leading to a ripple effect on the broader economy.
Dr Ravi Singh, Senior Vice President of Retail Research at Religare Broking Ltd., pointed out the potential impact on energy markets. “If the conflicts aggravate, markets may face protracted instability, with energy and defense sectors feeling the impact first. Additionally, artificially inflated energy prices and lower consumer confidence could create challenges for global markets.”
While global markets are closely watching the Middle East, experts believe India is in a relatively strong position to navigate these uncertainties. Despite being an emerging market, India has shown resilience in the face of past geopolitical disruptions.
Factors such as strong domestic consumption, proactive government policies, and continued foreign investments have helped India maintain economic stability.
“India has shown resilience and adaptability, attracting sustained capital inflows. Its growing economic strength and proactive policy measures position it to navigate market fluctuations more effectively than in the past,” said Dr Singh.
He believes that India’s stock market will continue to show strength, provided the conflict does not escalate dramatically.