West Asia tensions keep stock markets on edge: Where are investors parking their money? – Firstpost

Financial markets found a measure of relief on Tuesday as crude oil prices slipped below the $100-a-barrel mark, but volatility remains elevated with the Strait of Hormuz crisis in West Asia far from resolved.

Brent crude
fell to around $96–97 per barrel in early Asian trade, retreating from Monday’s sharp rally, while US West Texas Intermediate (WTI) hovered near $96. The pullback followed renewed hopes of dialogue between the United States and Iran, even as a US-led naval blockade of Iranian ports continues to disrupt supply routes across the Gulf.

The easing in oil prices, however, has done little to fully calm investor nerves, with analysts warning that underlying risks to global energy supply remain significant. Estimates suggest as much as 10 million barrels per day of crude flows have already been disrupted, with further downside risks if the standoff prolongs.

Dalal Street volatile

Back home, Indian markets remain caught between relief rallies and sharp sell-offs driven by global cues.

On Monday, the Nifty50 slipped below 23,600, while the
Sensex tumbled more than 1,500 points in early trade. The rupee weakened sharply to 93.32 against the US dollar, reflecting pressure from elevated oil import costs and sustained foreign institutional investor (FII) outflows.

While Tuesday’s softer oil prices may offer some near-term respite, currency and equity markets are expected to remain highly sensitive to every headline emerging from the conflict.

Macro shock still in play

Experts caution that the current phase is not a routine correction but a macro-driven repricing of risk.

The recent spike in crude and capital outflows has fundamentally altered the market landscape, said Manoj Puravankara, co-founder and group COO at Atom Prive Financial Services.

“What we are seeing right now is not a typical market correction — it’s a macro shock being driven almost entirely by oil and capital flows,” he said.

He warned that even with oil below $100, sustained elevated levels could still push inflation above 4 per cent, weigh on India’s growth outlook, and delay any rate-easing cycle.

Has the worst been priced in?

There is cautious optimism that Indian equities may have already absorbed a significant portion of the geopolitical risk — at least in the near term.

“The Indian markets have largely factored in the impact of the war unless the conflict gets prolonged,” said Nandish Shah of Motilal Oswal Financial Services, pointing out that the Nifty’s forward P/E has cooled to around 18x, a 15 per cent discount to historical averages.

However, he added that crude oil remains the key variable, with any renewed spike likely to trigger earnings downgrades and fresh volatility.

Where should investors allocate now?

With uncertainty still high, market experts are advising a balanced and diversified approach.

Puravankara recommended maintaining a 50–55 per cent allocation to equities, with a tilt towards large-cap and defensive sectors such as banking, energy, and FMCG. Fixed income should account for 20–25 per cent, while a 10–15 per cent allocation to gold can act as a hedge. Maintaining liquidity of 10–15 per cent is critical to capitalise on corrections, he added.

“The banking sector is well-positioned with strong asset quality, improving loan growth, and stable margins,” said Shrikant Chouhan, head of equity research at Kotak Securities, who prefers private banks over PSU lenders. He also highlighted opportunities in NBFCs and capital market-linked businesses.

Shah added that sectors such as capital goods, telecom, and consumption are well placed to benefit from domestic growth drivers, even amid global uncertainty.

Real estate gains traction as hedge

Beyond traditional safe havens, real estate is emerging as an alternative defensive play.

Grade-A commercial assets and REITs offer stable rental yields of 6–8 per cent and annual appreciation of 8–12 per cent, making them attractive in volatile times, said Keshav Mangla, GM (business development) at Forteasia Realty.

Vijay Raundal, managing director at Teerth Realities, highlighted the resilience of domestic housing demand — particularly in mid-income segments — driven by urbanisation and infrastructure expansion.

Stagger investments, stay disciplined

Market veterans emphasise that geopolitical corrections, while sharp, are often short-lived.

Hrishikesh Palve, director at Anand Rathi Wealth, said markets have already corrected 10–12 per cent from their January peaks.

“Historically, such corrections driven by geopolitical events tend to be sharp but eventually recover in 3–6 months,” he said, advising investors to deploy 30–35 per cent of capital now and stagger the rest over the next six to eight weeks.

He also recommended continuing SIPs and focusing on diversified equity funds to navigate volatility.

Oil remains the key trigger

Even as crude retreats below $100, the outlook remains fragile.

Any meaningful de-escalation in West Asia and restoration of shipping through the Strait of Hormuz could stabilise markets quickly. Conversely, a renewed spike in oil prices or further escalation could reignite inflation fears and market turbulence.