Indian Stock Market: Iran War End Could Boost Equities

An end to the US-Iran conflict could provide a significant boost to Indian stock markets by lowering crude oil prices, easing inflationary pressures and improving investor sentiment, according to Amundi Investment Institute, the research arm of French asset manager Amundi SA.

Alessia Berardi, head of global macroeconomics and emerging markets strategy at the institute, expressed optimism about the outlook for Indian equities, citing improvements in private investment and economic indicators. She said a resolution to the conflict could become a turning point for global investors evaluating opportunities in India.

“I’m quite positive,” Berardi said in an interview in Mumbai last week, adding that the end of the conflict could be a “tipping point” for investors considering Indian markets, Bloomberg reported.

How an End to the Iran War Could Benefit Indian Stock Markets

India’s heavy dependence on imported crude oil makes its economy particularly vulnerable to disruptions in global energy supplies. Since late February, the conflict has increased pressure on the country, with disruptions to oil shipments through the Strait of Hormuz contributing to higher crude prices and renewed inflation concerns.

Rising oil prices can increase India’s import bill, put pressure on the rupee and raise costs across the economy. These factors can affect corporate profitability, consumer spending and investor confidence, creating additional challenges for the stock market.

A sustained decline in crude prices following a resolution to the conflict could help ease these pressures. Lower energy costs may reduce operating expenses for fuel-intensive industries, while cheaper petroleum-based raw materials could benefit businesses across manufacturing and other sectors. Reduced inflationary pressure could also improve the broader economic outlook and support investor sentiment.

India’s crude oil import dependency reached 88.6% during April-January of the 2025-26 financial year, according to the government’s February 2026 Monthly Economic Review. The report highlighted how elevated crude prices can contribute to domestic inflation by increasing fuel costs and weakening the rupee.

However, the extent of any recovery in Indian equities would depend on several factors, including the sustainability of lower oil prices, the restoration of normal shipping through the Strait of Hormuz and investors’ assessment of corporate earnings prospects.

Indian equities have previously responded positively to expectations of progress towards a peace agreement. On May 25, the Nifty 50 rose 1.32% and the Sensex gained 1.42% as hopes of a US-Iran agreement pushed crude prices lower. Brent crude futures fell 5.5% to $97.80 a barrel, Reuters reported.

Why Indian Stocks Have Been Under Pressure

Amundi’s positive assessment comes after a challenging period for Indian equities. The benchmark NSE Nifty 50 has declined nearly 14%, making India one of Asia’s weaker-performing stock markets amid subdued earnings growth and substantial foreign investor outflows.

Foreign investors have withdrawn more than $30 billion from Indian markets, adding pressure to equities and the rupee. The combination of geopolitical uncertainty, elevated energy costs and concerns about corporate earnings has weighed on market sentiment.

An end to the conflict could improve global investors’ perception of India’s economic prospects, particularly if falling oil prices help reduce inflationary risks and strengthen expectations for corporate earnings. Nevertheless, a recovery in foreign investment is not guaranteed.

Investors will continue to assess earnings growth, stock valuations and investment opportunities in competing markets before increasing their exposure to Indian equities. A decline in crude prices could provide relief, but sustained market gains would also require confidence in the domestic economic outlook and company performance.

India’s economic growth has remained relatively resilient despite external challenges. The Reserve Bank of India raised its growth forecast for the current financial year to 7.1%, up from 6.7%. The economy expanded 7.8% in the April-June quarter, supported by domestic demand, Bloomberg reported.

Berardi believes India’s economic prospects could be stronger than current market sentiment suggests. A reduction in geopolitical risks and energy costs could help investors reassess the country’s growth potential, although the pace of any market recovery would depend on developments across the global economy.

Which Indian Stock Market Sectors Could Benefit?

Beyond the overall market outlook, Berardi favours companies associated with India’s defence and manufacturing sectors. These industries have benefited from the country’s efforts to expand domestic equipment production and strengthen its industrial capabilities.

An index tracking defence stocks has gained more than 16% this year, outperforming global peers. The sector’s performance reflects growing attention to domestic production and the potential for Indian companies to benefit from increased demand for locally manufactured equipment.

A potential end to the Iran war could also create opportunities in other parts of the market. Lower crude prices may benefit airlines, transport companies and other fuel-intensive businesses by reducing operating expenses. Companies that rely on petroleum-derived materials could also see some relief in input costs.

However, the benefits would vary by industry and company. Individual stock performance would continue to depend on earnings growth, valuations, demand conditions and sector-specific risks. Lower oil prices alone would not guarantee gains across the market.

What Investors Should Watch Next

The outlook for Indian equities will depend partly on whether diplomatic progress leads to a lasting reduction in Geopolitical Tensions and a sustained fall in crude oil prices. The normalisation of oil shipments through the Strait of Hormuz will also be important for India’s energy costs and inflation outlook.

Investors will additionally monitor foreign fund flows, corporate earnings and economic indicators to determine whether improved external conditions translate into stronger market performance. A more favourable combination of lower energy prices, resilient domestic demand and improving earnings could help restore confidence in Indian stocks.

For now, Amundi Investment Institute’s assessment suggests that an end to the US-Iran conflict could remove a significant source of pressure on the Indian economy. While a sustained market recovery is not assured, lower crude prices and improving investor sentiment could create a more supportive environment for Indian equities.