Khamenei’s death, which was confirmed by Iranian state media this morning, prompted warnings of severe retaliation from Tehran. US President Donald Trump announced that the 86-year-old leader was killed on the first day of the extensive joint airstrikes.
Khamenei’s death can be seen as a major development in the ongoing war in the Middle East. It opens a period of uncertainty about Iran’s leadership, and worries about strong retaliation and international tensions.
What do you expect from the markets tomorrow?
Sunny Aggarwal, head of fundamental retail research at SBI Securities, sees rising geopolitical tensions as a negative for tomorrow’s markets, and does not expect a knee-jerk reaction. News of Khamenei’s death and possible retaliation could cause a small gap to open on Monday. “After this, uncertainty should normalize,” he said, adding that the ultimate watchdog would be crude oil prices. If oil prices are calm, Agarwal doesn’t think the markets will react much, and feels how the markets will react in the long run will be influenced by many developments in the future.
Meanwhile, Kranti Bhattini of Wealth Mills Securities said that no one expects expansion in the Middle East, especially in the UAE. So this will have a negative impact on the financial markets in the short and medium term. “But as far as Indian markets are concerned, crude oil performance will remain a key watch.”
Bathini explained that one good thing is that India is benefiting from the recent crude oil shortage. “But if the price of crude oil rises above $80 per barrel, it could create inflationary pressure in the market.”
“So one has to see how crude will behave over the next few days,” Bethenny said, adding that India’s domestic fundamentals remain strong. He added: “The markets are definitely in a downward spiral at the moment, driven by a variety of reasons. So, of course, it will have the effects of wars in the short and medium term, not in the long term.”
Manurjan Sharma, Chief Economist at Infomerics Ratings, also noted that for India, which is heavily dependent on crude oil imports, the immediate result is rising inflationary pressures caused by higher energy prices.
“Indian equity markets have already reacted with risk-averse sentiment. Benchmark indices are expected to open lower, with higher volatility prompting investors to reassess geopolitical and commodity-related risks. A short-term correction of around 1-1.5% is possible, as fiscal stress eases in the FMC sectors. Conversely, IT companies and top export businesses may avoid global risk and the U.S. The dollar finds relative support amid strengthening.
Equity markets were already fragile in February, with the S&P 500 and Nasdaq Composite falling in the US, and India’s Nifty 50 falling to a year-to-date low, said Nachikita Swarikar, fund manager at Artha Bharat Global Multiplier Fund. “Against this backdrop, an attack by the United States and Israel on Iran would lead to a massive selloff of risky assets in both developed and emerging markets,” he said.
“We expect the ongoing rally in US Treasuries, oil, gold and silver to extend. For India, the impact is generally broader: higher crude oil prices widen the current account deficit, curb domestic inflation, pressure the rupee, and may lead to FII withdrawals as global investors reduce risk aversion.”
What should investors do?
25,000 has been a strong support for the Nifty for the past few months and is expected to remain so in the near term, Agarwal explained. “If the markets are kept flat, I don’t see any sharp reaction in the markets,” he said.
Asked which sectors would react the most to the potential uncertainty, the analyst said oil-linked stocks would remain in focus tomorrow. Oil marketing companies (OMC) stocks may see a slight decline, while oil refiners may see a rise in stock prices if oil prices rise. Paint, tires and other stocks will also be in focus.
Meanwhile, Batini said, investors should use the uncertainty as an opportunity to accumulate. He added: “When the war between Russia and Ukraine started, the Nifty 50 fell below 22,000, but after a few years the markets ignored this factor and started to grow again.”
The analyst added that as long as India’s trade is not disrupted, currency markets will recover losses after some time.
“Overall, markets remain highly sensitive to geopolitical risks and sector-specific pressures, pushing investors towards defensive, domestic-focused sectors,” said Vinod Nair, head of research at Geojet Investments Limited.
Indian stock markets fell sharply on Friday to close to near one-month lows, with the Sensex down nearly 1,000 points and the Nifty closing below the 25,200 mark. The sell-off wiped out more than Rs 5 lakh crore in investors’ assets, bringing down the total market capitalization of all BSE-listed companies to around Rs 463 lakh crore.
India’s benchmark indices extended losses for the second consecutive session, led by multiple factors leading to declines in realty, financials, auto and FMCG shares. The Sensex fell over 961 points to 81,287, while the Nifty 50 fell around 318 points to 25,179. Notably, Friday marked the first time since February 2 that the Sensex closed below the 82,000 mark and the Nifty 50 closed below the Rs 25,200 mark.
(Disclaimer: The suggestions, recommendations, views and opinions given by the experts are their own. They do not represent the views of The Economic Times)
