US-Iran Conflict Raises Global Market Risks: Indian Equities Brace For Volatile Week

Foreign portfolio investors, who had shown signs of renewed interest in the Indian markets, may become more cautious if geopolitical tensions worsen.

As markets open for the week tomorrow, investors worldwide will be carefully watching not only the ongoing geopolitical drama but also economic indicators and central bank commentary.

Source : ABPLIVE AI

The Indian stock market is poised for a potentially volatile week as investors closely watch the fallout from the United States’ military strikes on Iran. Market participants are expected to weigh the geopolitical developments following President Donald Trump’s announcement of what he described as a “spectacular military success” after American forces targeted Iran’s nuclear infrastructure over the weekend.

Speaking on Sunday, Trump addressed the nation alongside Vice President JD Vance, Secretary of State Marco Rubio, and Defence Secretary Pete Hegseth. He detailed the strikes, which hit three major nuclear sites—Fordow, Natanz, and Isfahan—stating, “Everybody heard those names as they built this horribly destructive enterprise.” Trump asserted that the aim was “destruction of Iran's nuclear enrichment capacity and a stop to the nuclear threat posed by the number one state sponsor of terror.” While Tehran insists its nuclear programme serves peaceful purposes, Trump claimed, “Iran's key nuclear enrichment facilities have been completely and totally obliterated.”

Geopolitical Risks Keep Global Investors on Edge

The escalation adds a new layer of uncertainty to global financial markets, which are already grappling with heightened volatility. Ajit Mishra, SVP, Research, Religare Broking Ltd, noted that “this week, global cues will remain the dominant force, with a focus on geopolitical tensions between Iran and Israel, US economic data, and commentary from the Federal Reserve officials.” Domestically, investors will also track the progress of the monsoon, monthly derivative expiry-related volatility, crude oil prices, and the activity of foreign institutional investors (FIIs) for additional direction, reported PTI.

Despite the brewing tensions, Indian equities ended last week on a strong note. On Friday, the BSE Sensex surged 1,046.30 points, or 1.29 per cent, closing at 82,408.17, while the NSE Nifty climbed 319.15 points, or 1.29 per cent, finishing at 25,112.40.

Over the week, the Sensex gained 1,289.57 points (1.58 per cent), and the Nifty added 393.8 points (1.59 per cent), signalling resilient investor sentiment even amid Middle East concerns.

Vinod Nair, Head of Research, Geojit Financial Services Ltd, cautioned that “geopolitical uncertainty continues to loom,” and highlighted that upcoming US GDP and Personal Consumption Expenditure (PCE) data, alongside India’s PMI figures, will be crucial indicators for assessing the strength of global and domestic economic recovery.

FPIs Return but Maintain Cautious Optimism

Foreign portfolio investors, who had shown signs of renewed interest in the Indian markets, may become more cautious if geopolitical tensions worsen. “The trend of foreign portfolio investment experienced a reversal in April and demonstrated considerable strengthening in May, characterised by positive inflows. The inflows recorded in May represented the highest level observed in eight months, signifying a resurgence of interest from foreign investors in the Indian markets,” explained Vipul Bhowar, Senior Director, Listed Investments, Waterfield Advisors. However, he added that “geopolitical tensions, including the conflict between Israel and Iran, alongside global uncertainties, fostered a cautiously optimistic pattern in June.”

Siddhartha Khemka, Head of Research, Wealth Management at Motilal Oswal Financial Services Ltd, echoed similar views, saying, “Markets may consolidate with bouts of volatility” as investors respond to global cues, including US manufacturing and services PMI data and any further geopolitical developments.

Trump Issues Fresh Warnings to Iran

As the global community assesses the implications of the US strikes, Trump issued a stern warning to Tehran, calling Iran “the bully of the Middle East” and urging it to pursue peace. “They must now make peace,” he declared, adding that “if they do not, future attacks will be far greater and a lot easier.”

As markets open for the week tomorrow, investors worldwide will be carefully watching not only the ongoing geopolitical drama but also economic indicators and central bank commentary, all of which could determine the near-term direction of global equities.