- Markets panic initially at war but generally recover once tensions ease globally and in India
- Sensex and Nifty show sharp drops then strong rebounds post conflicts and terror attacks historically
- Recent Operation Sindoor triggered minor Sensex dip with quick recovery
History shows markets panic at the sound of war and then, more often than not, recover once the dust settles. As fresh tensions involving Iran roil global headlines and raise fears over oil supply disruptions, investors are once again asking the same question: is this a crisis to flee from, or one to ride through?
The pattern, both globally and in India, is striking.
In July 1914, as World War I erupted, the New York Stock Exchange shut down and remained closed until January 1915. When it reopened, stocks were sharply lower. Yet markets eventually stabilized and moved higher. The shock was violent. The recovery, enduring.
Indian markets have followed a similar script.
During the 1990–91 Gulf War, the Sensex fell 18 percent before the conflict but surged 50 percent over the next six months. The 1999 Kargil War saw the Nifty drop 13 percent initially, then rally more than 31 percent in six months. When the Iraq War began in 2003, the Nifty slipped 6 percent at the start and climbed over 31 percent in the following half year.
Even terror attacks followed that arc. After the 2008 Mumbai 26/11 attacks, markets crashed on day one but delivered a 54 percent return over six months and nearly 82 percent over a year. Pulwama and Balakot in 2019 produced volatility, yet six- and 12-month returns remained positive. The pattern repeated after Russia's invasion of Ukraine in 2022 and the Israel–Hamas conflict in 2023: sharp initial drop, steady medium-term rebound.
The latest escalation reflects that template. On May 7, 2025, the day of the main strikes under Operation Sindoor, the Sensex opened lower but rebounded more than 800 points intraday to close marginally positive. In subsequent sessions, it slipped around 1 to 1.5 percent before stabilizing. Analysts comparing Kargil, Uri and Sindoor describe the impact as a small dip with quick recovery and no clear medium-term drag.
Brokerages largely expect a knee-jerk correction of 1 to 2 percent if tensions stay elevated, not a full-blown crash. The real variable is crude oil. Scenario analysis from houses like JM Financial suggests that any disruption in the Strait of Hormuz could push Brent toward 90 to 100 dollars a barrel. That would pressure India through higher inflation, a wider current account deficit and potential rupee weakness, the factors that could meaningfully drag equities.
Sectorally, oil marketing companies, aviation and logistics may feel near-term pain. Rate-sensitive segments such as banks and discretionary consumption could wobble if elevated oil delays rate cuts. Upstream producers like ONGC and Oil India stand to gain from higher realizations, while defence names such as HAL and BEL may benefit from stronger order visibility.
March has historically been a modestly positive month for Indian equities, with the Nifty closing higher in eight of the past 10 years and average gains around 0.8 percent. But investors are watching three signals closely: the intensity of retaliation, Brent's ability to stay below 90 dollars, and whether shipping through Hormuz remains uninterrupted.
