US Naval Blockade of Iran to Commence: Assessing Market Preparation for Potential Consequences

Market Sentiment Swings as US-Iran Conflict Escalates

The Indian stock market closed on Monday at 23,843, down 0.86 per cent for the day but comfortably above the war-led March lows and sitting squarely in the higher-base zone. Meanwhile, Brent crude prices have surged back above $102 to $103 a barrel, nearly 45 per cent higher than 2025's average of around $70.

The recent escalation of the US-Iran conflict has led to a significant increase in tensions, with President Donald Trump ordering the US naval blockade of Iranian ports and the vital waterway to begin at 7:30 PM IST tonight. This move is expected to directly impact supply, tightening it and leading to higher prices. As a result, Brent prices have climbed back above $100 this morning in Asia.

Despite the uncertainty surrounding the conflict, the Indian market has shown signs of stabilisation in recent days, with the Nifty clawing back from its late-March capitulation low of 22,180. Several major brokerages note that the sharp fall now appears to be bottoming out, but caution that a swift V-shaped recovery is unlikely.

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Market Assessments

There are differing opinions among market analysts regarding the impact of the conflict on the Indian market. Shrikant Chouhan, Head of Equity Research at Kotak Securities, remains cautious, believing it is still too early to declare victory. He notes that the impact of the ongoing war has not been fully factored into the markets, and that oil prices remain significantly elevated compared to last year's average levels.

On the other hand, Nandish Shah, AVP – PCG Research & Advisory at Motilal Oswal Financial Services, is more constructive, arguing that the Indian markets have largely factored in the impact of the war unless it gets prolonged. He notes that the March sell-off has already reduced Nifty 50 valuations to a 12-month forward P/E of 18x – a comfortable 15 per cent discount to its long-period average.

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India-Specific Risks

The country's Strategic Petroleum Reserves are only about 64 per cent full, offering roughly 9 to 10 days of effective import cover at current consumption levels. Market sources say the government is already monitoring the need for a quiet drawdown as the blockade hour approaches. Additionally, the US sanctions waiver for operations at Chabahar port – one of New Delhi's key alternate energy corridors – expires on April 26, just 13 days from now.

Analysts are suggesting selective buy-on-dips in domestic-themed defensives – oil upstream, fertiliser, defence, and select PSUs. The current 18x forward valuation offers a reasonable margin of safety for medium- to long-term investors, provided the blockade and conflict do not stretch into a multi-month affair.