Iran-Israel Conflict and Its Financial Impact

Understanding the Market Response

The ongoing conflict has created ripples across various sectors. Investors must assess the implications for their financial decisions. A proactive approach is required, taking note of trends and adapting to an ever-changing landscape. Understanding how geopolitical tensions can affect individual financial situations is crucial.

Gold Prices Surge as Safe-Haven Demand Soars

Gold has always been a trusted asset during uncertain times. The current crisis is no exception. On June 23, 2025, gold prices surged 2.95% to $3,379.60 per ounce globally. This spike reflects heightened investor demand for safe-haven assets amid fears of further escalation. In India, domestic gold prices have mirrored this increase, with 24-carat gold reaching approximately ₹85,000 per 10 grams in major cities like Mumbai and Delhi. This is up from ₹82,000 just a week ago.

• Why It Matters: Gold serves as a hedge against geopolitical risks and currency volatility. As the U.S. dollar strengthens and the Indian rupee experiences pressure, gold’s appeal grows for Indian investors.

• What You Can Do: Allocate a small portion (5-10%) of your portfolio to gold through physical gold, gold ETFs, or sovereign gold bonds. Avoid panic-buying at peak prices, as market volatility can lead to short-term corrections.

  
  

Petrol and Diesel Prices Under Pressure

The conflict threatens to disrupt oil supplies through the Strait of Hormuz, a critical chokepoint for 20% of global oil flows. As a result, alarms have been raised over fuel prices. Crude oil prices skyrocketed over 10% in recent days, with Brent crude hovering around $85 per barrel. In India, where over 85% of crude oil is imported, petrol and diesel prices are expected to rise further. As of June 23, petrol in Delhi costs ₹98.50 per litre, an increase from ₹96.72 a week ago.

• Why It Matters: Higher fuel prices directly affect transportation and logistics costs, thus driving up inflation. This impacts household budgets, especially those related to commuting and essential goods.

• What You Can Do: Reduce fuel consumption through carpooling or public transport. For investors, energy stocks such as Reliance Industries or ONGC may prove beneficial, but caution is advised due to market volatility.

  
  

LPG Costs May Rise, Adding to Household Expenses

The increase in crude oil prices affects liquefied petroleum gas (LPG), a vital household fuel in India. With global oil prices soaring, LPG cylinder costs are projected to rise by ₹50-100 in the coming weeks, depending on subsidy adjustments. Currently, a 14.2 kg domestic LPG cylinder in Delhi costs ₹903. Analysts predict it could exceed ₹1,000 if disruptions in the Strait of Hormuz occur.

• Why It Matters: Rising LPG prices can strain middle-class budgets, particularly families reliant on cooking gas. Combined with rising food inflation, this can limit discretionary spending.

• What You Can Do: Invest in energy-efficient appliances to reduce gas usage. Prepare budgets for potential price hikes by trimming non-essential expenses.

  
  

Loans and Interest Rates: Inflation Concerns Persist

The conflict's impact on oil prices may fuel inflation, causing caution from the Reserve Bank of India (RBI). Analysts believe the RBI may hesitate to lower interest rates, keeping the repo rate around 6.5%. This affects borrowers, as home, auto, and personal loan rates remain high, with home loan EMIs averaging 8-9% annually for new borrowers.

• Why It Matters: Higher interest rates increase borrowing costs, impacting affordability for significant purchases such as homes or cars. Those with floating-rate loans may see a rise in EMIs if rates climb further.

• What You Can Do: Opt for shorter loan tenures to minimize interest payments. Fixed-income investors should consider short-term bonds or fixed deposits to protect their returns in a high-rate environment.

  
  

Stock Markets and Investments: Navigating Volatility

The Indian stock markets have responded sharply to the crisis. On June 23, the Sensex dropped 784 points to 81,624.01, while the Nifty fell below 24,900 in morning trade. Sectors like IT (e.g., Infosys, down 2.34%) and auto (e.g., Mahindra & Mahindra, down 1.79%) faced selling pressure, while energy stocks demonstrated resilience. Global markets, including Japan’s Nikkei (-0.74%) and South Korea’s Kospi (-1.22%), also declined, showcasing widespread risk-off sentiment.

• Why It Matters: Market volatility poses risks but also presents opportunities. Escalation of the conflict, especially with U.S. involvement, might lead to additional sell-offs if Iran retaliates or oil supplies are disrupted.

• What You Can Do: Consider adopting a “buy on dips” strategy for fundamentally strong stocks, as advised by market analyst Shivam Verma from 8bit Market Research. Emphasize defensive sectors such as pharmaceuticals and FMCG, which are less sensitive to geopolitical shocks. Diversification through mutual funds or systematic investment plans (SIPs) can also mitigate risks.

  
  

Trade and Exports: India’s West Asia Challenges

The conflict poses a threat to India’s trade with West Asia, a crucial area for exports and energy imports. Disruptions in trade with countries like Iran, Israel, and Iraq could occur, compounded by risks to shipping routes such as the Red Sea and Strait of Hormuz. India’s exports fell 2.17% in May, partly due to reduced petroleum product shipments, with prospects that further escalation could worsen this trend.

• Why It Matters: Trade disruptions could negatively affect sectors reliant on exports, such as textiles and chemicals, potentially impacting jobs and economic growth.

• What You Can Do: Keep an eye on companies heavily reliant on trade with West Asia (e.g., Adani Ports) and consider limiting your exposure to such stocks.

  
  

Expert Insights and Market Outlook

Despite the short-term volatility caused by the ongoing situation, analysts maintain a cautiously optimistic view of India’s medium-term market outlook. Shivam Verma of 8bit Market Research emphasizes that the primary concern is the potential closure of the Strait of Hormuz, which could drive oil prices even higher. However, technical analysts argue that the market’s long-term uptrend remains intact, buoyed by robust domestic inflows—evidenced by DIIs purchasing ₹11,672 crore worth of shares last week.

Verma describes this phase as a “turning point for markets,” raising questions about the lasting status of U.S. assets as safe havens. For Indian investors, the emphasis should be on resilience—balancing risk and rewards during these turbulent times.

Key Takeaways for Indian Consumers and Investors

1. Gold: A safe asset during uncertainty. Buy wisely to avoid overpaying.

2. Fuel and LPG: Prepare for higher costs. Adjust budgets and explore efficiency measures.

3. Loans: Anticipate steady or rising rates. Focus on shorter loan tenures to reduce costs.

4. Investments: Maintain a diversified portfolio, prioritize defensive sectors, and take advantage of market dips.

5. Trade Risks: Keep an eye on export-oriented stocks for potential challenges.

   
   

As the Iran-Israel conflict continues to unfold, staying informed and adaptable is essential. While numerous challenges lie ahead, prudent financial planning can help navigate these uncertain times. For the latest updates, visit 8bit Market Research or consult a certified financial advisor before making any investment decisions.

Disclaimer: The views expressed are based on market trends and expert opinions as of June 23, 2025. Always consult certified experts before making financial decisions.