Why Investors Dumped Stocks Today: Spotlight on Trump's Iran Remarks, Rising Crude and Global Fears

Indian benchmark indices ended sharply lower on Wednesday, with the Sensex plunging 1,677 points and the Nifty losing more than 500 points, after US President Donald Trump's remarks on Iran and other geopolitical issues at the NATO summit triggered a wave of global risk aversion and pushed crude oil prices higher.

Trump remarks trigger global risk-off sentiment

Selling intensified in the final hour of trade after Trump, speaking at the NATO summit in Ankara, announced fresh US military action against Iran.

"We attacked very powerfully last night against Iran. Iran shot rockets at ships, that's why US hit back," Trump said.

He also remarked, "Iran doesn't know what it's doing, they are incompetent," and added, "We wasted a lot of time with Iran," fuelling fears of a renewed escalation in West Asia.

Trump also made a series of remarks on trade and defence, saying, "Not happy with NATO regarding Greenland," while criticising Spain by stating, "Spain is a wasted cause, don't want to do trade," and adding that he wanted to "cut off all trade with Spain." He further said, "Greenland is a big problem," and claimed, "We pay far too much into NATO."

The comments heightened concerns over geopolitical tensions, sending Brent crude prices nearly 4 per cent higher to USD 76.71 per barrel and weighing on investor sentiment globally.

Sensex, Nifty tumble as volatility spikes

The benchmark Nifty 50 fell more than 500 points, or over 2 per cent, to settle at 23,887.45, while the Sensex dropped 1,677 points, or around 2 per cent, to close at 76,555.

Broader markets also came under heavy selling pressure, with the Nifty Financial Services and Nifty PSU Bank indices emerging among the worst-hit sectors. Meanwhile, India VIX surged more than 28 per cent, signalling a sharp rise in market volatility.

Market and banking expert Ajay Bagga said the collapse of the US-Iran peace process had sharply altered investor sentiment.

"The sudden collapse of the Memorandum of Understanding (MoU) between the US and Iran has triggered a sharp wave of risk-off sentiment across global financial markets, hitting Indian equities particularly hard," Bagga said.

"President Trump's declaration that the peace process is 'over' injects severe geopolitical uncertainty back into the critical Strait of Hormuz transit corridor. With crude oil prices surging rapidly on renewed supply and security fears, India--as a major energy importer--faces a double whammy of imported inflation and fiscal pressure," he added.

Oil surge, geopolitical risks cloud market outlook

Bagga said investors rapidly reduced exposure to equities as geopolitical risks intensified.

"Investors are aggressively shedding risk, leading to the sharp sell-off on Dalal Street today as the global market landscape rapidly recalibrates for a prolonged, volatile standoff in West Asia," he said.

He added that markets were already factoring in the possibility of a wider conflict.

"We still believe this is posturing from both sides to cater to their domestic compulsions, but the risk of escalation remains on the table and markets are pricing it in a hurry. Hopefully, the regional powers will prevail upon both the US and Iran to return to the negotiation table," Bagga said.

He expects market volatility to remain elevated until there are clearer signs of de-escalation in the region.

At the close of trading, the Dollar Index was up 0.10 per cent at 101.1300, while the Indian Rupee appreciated 0.62 per cent to 95.5600 against the US dollar.

(With inputs from ANI)