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War in the Gulf triggers broad based selling. History suggests better days after such conflicts

ICICIdirect Research 13 Mar 2026 DISCLAIMER

Indian markets have corrected about 8% since the conflict began amid a global equity sell off. A key reason is the sharp rise in crude oil prices which have surged more than 15%. Iran controls the Strait of Hormuz through which about 20% of global oil supply passes. This creates economic risks for energy importing countries such as India.

The key uncertainty for markets is the duration of the conflict and how long crude oil prices remain elevated. Historically, geopolitical conflicts have caused market declines of about 3% to 12%. However, the median return in the six months after such events has been around 38%.

Large caps have corrected more than mid-caps and small caps since the start of the conflict. Large caps are down about 8%, mid-caps around 7%, and small caps about 6%. The recovery could follow a similar pattern where large caps lead, followed by mid-caps and small caps.

In the near term, sectors such as oil marketing companies, aviation, paints, and fertilisers may face pressure due to higher crude prices. These sectors can also see a sharp rebound once the situation stabilises. Domestic oriented companies and pharma remain relatively insulated. Increased focus on defence spending could support stocks in the defence sector.

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