MUMBAI, March 7, 2026, 12:06 IST
Bombay Stock Exchange’s (BSE) Sensex ended last week with its sharpest weekly fall in 14 months, dropping 2.9% after a 1.37% slide on Friday to 78,918.90. The move marked its worst week since Dec. 20, 2024, as crude prices surged on the U.S.-Israeli war with Iran and investors cut risk. 1
That matters now because higher oil prices hit India quickly. The country imports more than 80% of its crude, so a sustained spike can widen the current account deficit — the gap between what India pays abroad and what it earns from trade and remittances — feed inflation and pressure the rupee. Bankers told Reuters the RBI sold an estimated $12 billion this week to steady the currency after about $2 billion left Indian equities. 2
The damage came in a holiday-shortened week. The Nifty 50, the Sensex’s NSE peer, also lost about 2.9%, while 15 of 16 major sectors fell and the broader small- and mid-cap indexes dropped 2.5% and 2.9%, showing the selling ran well beyond a few index heavyweights. 1
There was one pause, not much more. On Thursday the Sensex rose 1.14% to 80,015.90, led by Reliance Industries and metal shares, but Anita Gandhi, head of institutional business at Arihant Capital Markets, said the move was a “temporary bounce” after a sharp slide, not a clean turn in sentiment. 3
Monday set the tone after Iran shut navigation through the Strait of Hormuz, a route that carries nearly one-fifth of global oil flows and more than 40% of India’s crude imports, sending the Sensex down 1.29% to 80,238.85. Reliance slid 2.6%, while ONGC and Oil India rose as higher crude brightened the outlook for explorers. Bernstein analysts Venugopal Garre and Nikhil Arela said a prolonged conflict could push the Nifty below 24,500. 4
By Wednesday the index had sunk to 79,116.19, an 11-month closing low. The rupee weakened past 92 to a record low, and the volatility index — a gauge of market fear — jumped to its highest since May 9, 2025. Arun Kejriwal of Kejriwal Research and Investment Services said investors were looking to “exit when in doubt” and prune portfolios. 5
Financials took much of the weekly damage. State-run banks lost 6.5%, broader financials and banks fell about 4.5%, and oil and gas stocks dropped 3.9% as BPCL, HPCL and IOC sold off. Pankaj Pandey, head of retail research at ICICI Securities, said the market was “taking into account the near-term threat from oil prices,” though he added the macro hit may stay limited if crude does not remain high for long. 1
Larsen & Toubro was another pressure point. Macquarie said the Gulf conflict could disrupt its infrastructure and hydrocarbon work, CLSA said a March Hormuz blockade could shave 1.8% off earnings per share, and Axis Capital warned project execution could suffer if the crisis drags on. 6
The risk, for now, is duration. Oil derivatives suggest traders still see the shock as more logistical than structural, which could cap the damage if flows resume, and Samrat Dasgupta, chief executive of Esquire Capital Investment Advisors, said the week was “not all gloom.” But a longer war would keep inflation fears alive and could force the RBI to keep defending the rupee after an estimated $12 billion of intervention and roughly $2 billion of equity outflows this week. 7
