U.S.–Iran conflict: Is crude oil heading towards $95? What it means for Sensex, Nifty

Rising tensions in West Asia have pushed oil prices past $90 a barrel, marking the sharpest weekly surge since the Covid-19 pandemic and reigniting concerns about a fresh wave of global inflation.

Brent crude, the global benchmark, climbed about 28% during the week to settle at $92.69 per barrel on Friday - its biggest weekly gain since April 2020 and the highest level since April 2024. Prices were hovering around $72.50 before the conflict escalated.

Could crude climb further?

According to Apurva Sheth, Head of Market Perspectives & Research at SAMCO Securities, crude oil appears to be regaining momentum after months of consolidation, with prices potentially moving toward the $90–$95 per barrel range.

“It seems that the ongoing conflict between the United States and Iran is likely to keep prices elevated,” he said.

The confrontation between the United States and Iran has raised concerns about potential disruptions to supply flows through the Strait of Hormuz, one of the world’s most critical oil shipping routes. Nearly 20% of global oil supply passes through this narrow corridor, making energy markets highly sensitive to any escalation in the region.

Is a commodity cycle rotation underway?

Sheth noted that the recent move in crude is also linked to a broader commodity cycle rotation. Precious metals such as gold and silver have already rallied strongly amid geopolitical tensions and global uncertainty. As that rally matures, leadership within the commodity complex now appears to be gradually shifting toward energy, particularly crude oil.

Another indicator suggesting potential upside is the gold–crude oil ratio, which measures how many barrels of oil are required to purchase one ounce of gold. The ratio is currently around 62, reflecting the sharp rally in gold over recent years. Historically, such elevated levels tend to normalise over time.

With gold trading near $5,100 per ounce, a compression of the ratio toward 55–45 could mathematically push crude oil prices into the $95–$115 per barrel range, assuming gold prices remain broadly stable.

What could it mean for Indian equities?

Higher crude prices could carry significant implications for Indian equities. Historically, crude oil and the Nifty 50 have often moved in opposite directions. For a major oil-importing country like India, rising crude prices typically increase the import bill, stoke inflationary pressures, and dampen market sentiment.

From a technical standpoint, Sheth noted that the Nifty has faced repeated resistance near the 26,200–26,300 zone, where multiple breakout attempts have failed, signalling strong supply at higher levels. Last week, the Sensex fell nearly 2.9% to close at 78,899, while the Nifty 50 declined by a similar margin to 24,451, erasing about ₹13.89 lakh crore in investor wealth.

On the downside, 24,500 has emerged as a crucial support level. A decisive break below this mark could weaken the market structure and potentially open the door for a deeper correction toward the 21,500 zone, based on previous consolidation levels.

If crude oil sustains its upward momentum toward $90–$95 or higher, Sheth said rising energy costs could continue to pressure equities, making the 24,500 level on the Nifty a key trigger for the market’s next directional move.

Echoing a similar view, Ajit Mishra, SVP - Research at Religare Broking, said global crude price movements and further geopolitical developments in West Asia will remain key external factors influencing market direction in the coming week.

The week will also see important macroeconomic data releases that could shape near-term sentiment. On the domestic front, investors will closely watch Consumer Price Index (CPI) inflation data due on March 12, which will offer insights into price pressures following the recent spike in crude prices. Foreign exchange reserves data will also be tracked to gauge the strength of India’s external buffers, Mishra added.

Meanwhile, Vinod Nair, Head of Research at Geojit Investments, said global markets reacted sharply to escalating tensions in the Middle East, with Indian equities witnessing a sharp correction.

“Oil prices surged above $85 per barrel, while the Indian rupee weakened, reflecting concerns over prolonged disruptions to crude supply—a critical input for India’s economy. A sustained rise in oil prices could weigh on investor sentiment and impact India’s twin deficits, inflation outlook, and the RBI’s monetary policy stance,” he said.

He added that rising U.S. 10-year bond yields and a stronger dollar have prompted foreign institutional investors (FIIs) to adopt a risk-off approach toward Indian equities.

“Investors are gradually shifting toward traditional safe-haven assets and adopting a cautious stance while awaiting greater clarity,” Nair said. He added that reassurance over the security of the Strait of Hormuz could help stabilise market sentiment.

For now, Nair advised investors to avoid panic selling and maintain a disciplined, long-term perspective. “Current market levels could offer strategic entry opportunities for medium- to long-term investors, but patience will be crucial in the coming weeks,” he said.