Sensex, Nifty end lower on geopolitical tensions, costlier oil

Indian equity benchmarks ended lower on Friday, paring steep intraday losses triggered by rising geopolitical tensions and a sharp spike in crude oil prices. The BSE Sensex plunged as much as 1,337 points during the session but trimmed losses to close 573 points or 0.70 per cent lower at 81,119. Meanwhile, the NSE Nifty shed 170 points or 0.68 per cent, settling at 24,719.

The market selloff came in the wake of an Israeli airstrike on Iran, reigniting fears of a broader regional conflict and rattling global investor sentiment.

Despite the early panic, markets staged a late recovery, supported by selective buying in heavyweight stocks, noted Ajit Mishra, Senior Vice-President (Research) at Religare Broking.

He added, "The initial selloff was primarily triggered by a sharp spike in crude oil prices amid escalating geopolitical tensions in the Middle East. However, a moderation in CPI (retail) inflation helped cushion the downside and restore some investor confidence." Retail inflation cooled to a 75-month low of 2.82 per cent in May, down from 3.2 per cent in April.

Praveen Dwarakanath, Vice-President at Hedged.in, said, "Nifty opened with a significant gap down due to war-related developments but rebounded strongly from the 24,500 support level, closing nearly 1 per cent higher from the day’s low."

He also stated that the index remains in a range-bound zone between 24,500 and 25,200. "Today's recovery signals that dips near 24,500 are being bought into, with a potential short-term target of 25,200. Moreover, momentum indicators have bounced back from oversold territory, pointing to possible further upside," Dwarakanath explained.

Norbert Rücker, Head of Economics and Next Generation Research at Julius Baer, said the latest military escalation has reignited concerns over Middle East stability, with oil once again acting as a "fever measure" of geopolitical risk.

"Crude prices spiked in response, but the market remains resilient," Rücker noted. "We believe this conflict may follow familiar patterns—initial spikes in oil prices, followed by a reversion to the mean. Global supply remains robust, with ample storage, strong export growth outside the Middle East, and sufficient spare capacity."

Reflecting the heightened uncertainty, Julius Baer has revised its short-term oil price target to $72.5 per barrel but maintained its longer-term forecast at $60, with an overall "Neutral" stance on oil.