The US and Israel carried out a large, coordinated air and missile strike on Iran, targeting key military and government sites. In the attack, Iran’s Supreme Leader, Ayatollah Khamenei, was killed, creating a major political shock and a leadership vacuum in the country. Iran retaliated with missiles and drones aimed at Israel and some US-aligned countries in the region, while Hezbollah and other Iran-backed groups also launched attacks, increasing the risk of a broader regional conflict. A temporary leadership council was put in place in Iran, and with tensions rising across multiple fronts, the situation remained highly unstable and unpredictable. US President Donald Trump indicated that the conflict could continue for four weeks or more if
hostilities persist, while several countries in the region raised security alerts and imposed airspace restrictions as fears of further escalation grew.

Impact on India

• Higher crude oil prices remain the primary risk for India. With nearly 88–89% of crude requirements met through imports, any sustained increase will directly raise the country’s import bill.
• As per the commonly cited rule of thumb, every 10% increase in crude oil prices can widen India’s current account deficit by approximately 0.4% of GDP, thereby putting pressure on external balances.
• The Indian rupee may face depreciation pressures as elevated oil prices and global risk aversion could lead to foreign investor outflows.
• India’s energy security remains comfortable in the near term, as the government has indicated that the country holds adequate crude oil stocks, including strategic petroleum reserves and commercial inventories, which can help absorb short-term supply disruptions.
• However, prolonged geopolitical tensions could increase volatility in global energy markets and shipping routes, potentially raising freight and insurance costs for oil shipments and adding further pressure on India’s import bill and inflation outlook

How Should Investors Position Themselves?

• Stay patient and avoid panic decisions. Geopolitical conflicts create short-term volatility, but markets have historically recovered as uncertainty subsides. Even during the Russia–Ukraine war, initial corrections were followed by stabilisation and recovery.
• Maintain disciplined asset allocation. Avoid abrupt strategy changes. Keeping around 10–15% allocation each in gold and debt can help cushion downside risks during uncertain periods.
• Deploy fresh equity investments gradually through STPs for 3–6 months instead of lumpsum investing.
• Continue SIPs to benefit from rupee-cost averaging during market declines.
• If you have near-term financial goals, prefer debt or hybrid funds over pure equities.
• Use volatility as an opportunity. Corrections driven by sentiment rather than fundamentals can provide attractive entry points in quality businesses.
• Focus on relatively resilient sectors such as financials, pharmaceuticals, defence, and upstream energy. Be cautious in sectors sensitive to oil prices and global trade like aviation, oil marketing companies, autos, consumer discretionary, and infrastructure until clarity improves.