4 min readMumbaiJul 9, 2026 05:47 AM IST
First published on: Jul 8, 2026 at 02:34 PM IST
The Indian stock markets fell over 2% on Wednesday after US President Donald Trump scrapped the peace deal with Iran, erasing around Rs 10 lakh crore in market capitalisation.
It comes on the back of stock markets registering 2.4% gain over the last week due to the hope generated by the peace deal in the West Asia region.
The fresh escalation pushed crude oil prices by 6% to $79-$80 a barrel.
The rupee too weakened by 59 paise against the dollar, ending the session at 95.56.
Meanwhile, yields on the 10-year benchmark government bond hit a 3-week high as higher crude prices escalated inflationary fears, which may lead to the central bank raising interest rates.
The benchmark Sensex index closed the session down 1,677.12 points or 2.2% at 76,503.60. The National Stock Exchange’s benchmark Nifty 50 index lost 2.1% to end at 23,882.05. Both indices had opened the session around 1% lower but fell sharply more in afternoon trade after Trump’s announcement.
“Indian equities are expected to remain volatile in the near term as global risk sentiment has deteriorated following US President Donald Trump’s comments on ending the ceasefire with Iran and withdrawing from the MoU,” said Siddharth Khemka, head of research for wealth management at Motilal Oswal.
The situation in West Asia escalated after Iranian authorities attacked three commercial tankers in the Strait of Hormuz overnight.
This led to Iran and the US trading blows before Trump announced on Wednesday morning that the interim peace deal between the two countries signed in Islamabad last month was over.
“To me, I think it’s over. I don’t want to deal with them. As far as I’m concerned, it’s just a waste of time dealing with them,” Reuters reported Trump as saying in Ankara, Turkey.
Some stability in West Asia post the peace pact had led to a recovery in Indian markets, with early signs of foreign investors returning to the capital markets.
Following a $5.2 billion sell-off by foreign institutional investors (FIIs) in the Indian stock markets last month, they had bought $401 million in shares so far this month as of Tuesday. However, they are expected to have heavily sold during the sell-off on Wednesday.
The sell-off was broad-based, with all sectoral indices seeing sharp losses.
A host of sectors such as banking and financial services, FMCG, automobiles, and oil and gas lost over 2%. The India VIX index, which indicates market volatility, skyrocketed 26% to 14.68.
Investors now await earnings for the first quarter of FY27, which will be kick-started by TCS’ results on Thursday. Experts expect earnings growth to remain soft due to high crude prices and geopolitical uncertainties that persisted during the quarter.
“On an overall basis, we expect net income of the KIE (Kotak) universe to decline 8.7% yoy in 1QFY27 due to a sharp decline in the profits of OMCs from marketing and inventory losses amid crude price volatility,” a report by Kotak said. Earnings for sectors such as pharmaceuticals, transportation, and aviation will also be hit due to these reasons, the report said.
Other global markets had also ended lower earlier in the day.
The US markets had lost over 1% overnight. In Asia, the South Korean market fell 5% for the second straight day as fears about the sustainability of the AI rally deepened despite the profits of market heavyweight Samsung jumping manifold. Japan’s Nikkei 225 index also fell 2%. Meanwhile, Taiwan’s TAIEX index gained 0.6%.
Sensex was down 0.75% at 77,592, while the broader NSE Nifty 50 declined 0.72% to 24,217. 
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