Iran-Israel Escalation: Sectors to Benefit and Safe Haven Investments Amid Rising Tensions

Indian Stock Markets Rebound Amid Geopolitical Uncertainty

On March 5, the Indian stock markets opened higher, with the Nifty 50 gaining over 100 points and the Sensex rising by over 400 points to 79,530. This rebound follows a sharp decline on March 4, when the Sensex dropped 1,122 points to 79,116 and the Nifty 50 fell 385 points to 24,480 due to heightened geopolitical concerns and rising crude oil prices.

Historical Context

Indian markets have repeatedly shown resilience in the face of geopolitical shocks. During the Russia-Ukraine war in 2022, the Nifty 50 fell about 5 percent on invasion day but ended the year in positive territory. Similarly, after the Balakot airstrikes in 2019, the impact was short-lived and the index closed the year with double-digit gains.

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Sectors Benefiting from Uncertainty

Several sectors have historically done well during geopolitical stress and may benefit from the current situation.

• Upstream oil producers are immediate beneficiaries when crude prices rise due to supply concerns, with thematic energy funds delivering positive year-to-date returns of around 3 percent and a one-year return of over 27 percent as of March 3, 2026.
• Gold thematic funds and ETFs tend to be non-correlated with equity markets, making them a useful hedge, with annualised returns of close to 19 percent over five years.
• Infrastructure funds have returned about 23 percent over three years and over 20 percent over five years, driven by government spending on domestic infrastructure.
• Defence has structural support with the Union Budget 2026 allocating about Rs 7.85 lakh crore to defence, providing long-term revenue visibility for companies in the sector.

Defensive Sectors

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Among defensive sectors, pharma appears relatively better positioned, with sectoral pharma funds delivering over 14 percent in the past year and more than 12 percent annualised over five years. Telecom is also relatively insulated, driven largely by domestic demand and improving tariff structures.