4 min readMumbaiJun 8, 2026 07:59 PM IST
Further escalation in West Asia pushed the stock markets and the rupee lower on Monday amid concerns over high crude oil prices, an elevated inflation outlook, and potential interest rate hikes by the US Federal Reserve.
The Indian currency slumped 0.8% to end the session at 95.71 to the dollar, erasing almost all the gains seen on Friday after the Reserve Bank of India’s (RBI) measures to boost foreign inflows into the Indian market had buoyed sentiment.
“… renewed cross-border attacks between Israel and Iran escalated geopolitical tensions and pushed crude oil prices sharply higher. Brent crude surged more than 4%–5% towards the $97 zone, reviving concerns over India’s import bill and inflation outlook. The combination of rising crude prices, continued FII outflows, and risk-off sentiment in global markets kept pressure on the rupee despite RBI efforts to maintain orderly market conditions,” said Jateen Trivedi, vice president and research analyst for commodities and currency at LPK Securities.
However, the central bank is yet to announce the timeline for implementing its new measures announced Friday. When implemented, the steps are likely to attract $30 billion-$50 billion of foreign inflows, which is deemed positive for the rupee.
The market slumped 1% to two-month lows as high crude oil prices forced investors to be risk-averse. The NSE’s Nifty 50 index ended at 23,123, down 243.70 points. The BSE’s Sensex lost 719.09 points to end at 73,524.26. Barring healthcare, all sectoral indices ended in the red.
“On the sectoral front, broad-based selling was witnessed across all major sectors. Nifty Realty emerged as the biggest loser, declining 3.00%, followed by Nifty Metal, which fell 2.76%. Significant weakness was also visible in IT, Auto, and Energy stocks as investors reduced risk exposure amid uncertain global conditions,” said Bajaj Broking.
“The escalation of conflict in West Asia, with Iran firing missiles at Israel in retaliation to Israel’s aggression in Lebanon, has hardened crude prices,” said VK Vijaykumar, chief investment strategist at Geojit Financial Services. “The jobs data from the US is good, and therefore, the Fed will not cut rates as President Trump wants. The rates are likely to be on hold for some time,” he added.
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The fresh escalation in West Asia came after a sell-off across global markets amid risk-off sentiment, as investors anticipate US interest rates staying high for longer following positive labor data last week. While the US Federal Reserve is expected to maintain a status quo in its upcoming policy meeting on June 17, the CME Fedwatch tool now shows a 14.7% chance of a 25 basis points hike in its July 29 meeting, up from 6.4% a week ago. This pushed US Treasury yields higher, a sign of a cautious market pricing in rising interest rates.
The rising expectations of a rate hike have led to a sharp sell-off in AI stocks since late last week, with the US’ Nasdaq Composite dropping 4.2% on Friday, while other AI-heavy markets such as South Korea and Taiwan slumped 3-8% on Monday.
Indian IT majors also followed, with the Nifty IT index dropping nearly 8% in four sessions. Wipro lost 8.5% on Monday, while TCS fell over 2%. This follows a 7% rally in Indian IT stocks early last week, boosted by strong earnings by American IT majors.
