The Timeline of the Iran-Israel War and Its Cost to Indian Investors

On February 28, 2026, the Middle East changed.

US and Israeli forces launched coordinated strikes on Iran. The Supreme Leader, Ali Hosseini Khamenei, was reportedly killed. Iran retaliated hard. And the Strait of Hormuz, the narrow channel through which nearly a fifth of the world's oil flows every single day, was shut to tanker traffic.

Global markets did not wait. By the time Indian exchanges opened on March 2, the selling had already begun. In the two weeks since, Indian investors have watched the Nifty shed nearly 8%, the rupee hit record lows, and over 400 stocks lose double digits. Foreign investors have pulled out over ₹50,000 crore. Oil is hovering close to $100 a barrel.

This piece walks through exactly what happened, day by day. It covers why India is so exposed to a war it has no part in, which sectors got hit and which ones did not, what the rupee crisis means for ordinary consumers, and what analysts think comes next.

A Timeline of Escalating Pain

February 28: Operation Epic Fury is launched. US and Israeli forces strike Iran. The Supreme Leader is reportedly killed. Iran retaliates. The Strait of Hormuz faces closure. Global crude prices spike 10 to 13% overnight. Airlines begin suspending Middle East routes. Air India, IndiGo, British Airways, Lufthansa and several others halt flights as airspace across Bahrain, Iraq, Kuwait, Qatar, UAE, and Syria closes.

March 2 (Monday): Indian markets open to carnage. The Sensex crashes 2,743 points. The Nifty falls 533 points. India VIX, the market's fear gauge, surges close to 20%. In a single morning session, investors watch nearly ₹6.8 to 8 lakh crore in market capitalisation vanish. Fifteen of sixteen sectoral indices are in the red. Aviation, autos, consumer durables, banks, chemicals, oil and gas stocks all fall together. FII selling begins in earnest, with foreign investors offloading ₹7,536 crore on February 27 alone, and ₹3,295 crore more on March 2. Stocks like IndiGo crash 9% in a single session. Only a handful of names like BEL and Sun Pharma stay in positive territory.

March 4 (Wednesday): The war enters its fifth day with no sign of de-escalation. The Sensex falls another 1,745 points, hitting a low of 78,486. The Nifty slips to 24,334. The Indian government announces an emergency defence procurement worth ₹80,000 crore. Defence stocks like HAL and Bharat Dynamics surge.

March 6: The EU defence commissioner acknowledges US military resources are overstretched. Concerns grow that the conflict could widen into NATO territory, the Red Sea and the Eastern Mediterranean.

March 13 (Friday): Indian markets suffer what analysts call the worst Friday session since March 13, 2020, the day COVID-19 lockdowns began. The Nifty closes at 23,167, down 471 points. The Sensex ends at 74,622, down 1,412 points. India VIX hits 22.46. The rupee trades at 92.32 against the dollar, a record low at the time. By this point, the Nifty is down nearly 8% in March alone, the second sharpest monthly fall in a decade after March 2020's 23% pandemic collapse. Over 400 stocks have shed double digits since the conflict began.

The Oil Problem India Has Always Had

Here is a number that explains almost everything: 85%.

That is roughly how much of India's crude oil requirement is imported. India consumes about 5.6 million barrels of oil per day, and a significant chunk of those imports transit through the Strait of Hormuz, a 33-kilometre-wide channel between Iran and Oman that handles roughly 20% of global oil and LNG flows.

When Iran effectively shut down the strait, oil markets panicked. Brent crude, which was trading around $70 a barrel before the strikes, surged 10 to 13% to around $80 by March 2. Within days, it was pushing toward $100. By March 16, 2026, it was hovering close to $97 per barrel.

For a country that spends over $125 billion annually on crude oil imports, every $10 rise in the price of a barrel costs India an additional ₹1.5 lakh crore per year. That money has to come from somewhere. It either comes out of corporate margins, government subsidies, or consumers' pockets in the form of higher fuel, cooking gas and freight costs.

None of those outcomes are good for stock markets.

The Rupee's Own Crisis

While equity markets grabbed the headlines, the currency market was having its own rough fortnight.

The rupee hit a record low of ₹92.53 against the dollar at one point during this period, driven by a combination of forces. Rising crude oil imports created enormous demand for dollars. FIIs pulling out money added to dollar outflows. And globally, investors were rushing toward safe-haven assets like the US dollar and gold, which strengthened the dollar even further.

A weaker rupee makes imports more expensive, which means India's already ballooning oil import bill gets even larger when priced in rupees. It also stokes inflation more broadly, because freight costs, raw material costs, and energy costs all rise.

For the Reserve Bank of India, the situation creates a dilemma. Raise interest rates to defend the currency and fight inflation, and you risk slowing economic growth. Don't raise rates, and you risk the rupee sliding further and inflation getting worse. India's foreign exchange reserves, standing at around $716 billion, offer some cushion. But the RBI cannot fight both a currency war and an oil shock simultaneously with its hands tied.

₹50,000 Crore Gone Abroad

One of the most consequential dynamics in this selloff has been the sheer scale of foreign institutional investor outflows.

By the end of the first eight trading sessions of March, FIIs had sold over ₹45,000 to 50,000 crore worth of Indian equities. This is the worst monthly FII outflow reading since January 2025. The selling has now stretched to ten consecutive trading days of net FII selling (2nd March to 13th March).

During geopolitical crises, global investors typically move out of emerging markets and into safer assets like US Treasury bonds or the dollar. India, despite its strong domestic growth story, is not immune to this dynamic. Foreign investors hold roughly 20% of Indian equities. When they exit in force, the impact on prices is immediate and significant.

The total wealth erosion from listed Indian companies on the BSE has crossed ₹10 to 11 lakh crore since the conflict began.

The Middle East Connection India Cannot Ignore

It is easy to think of the Iran-Israel conflict as something happening far away, on a map, in a region India has little direct involvement with. But the economic linkages are deeper than they appear.

According to Jefferies, the Middle East accounts for 17% of India's total exports. It accounts for 55% of India's crude oil supply. And as per RBI, it accounts for 38% of India's inward remittances. Millions of Indian workers in the Gulf send money home to families every month. Any prolonged disruption to economic activity in the region, or to the ability of Indian workers to remain there safely, has real consequences for household incomes across states like Kerala, Tamil Nadu, and Uttar Pradesh.

Beyond oil, the conflict has already disrupted pharmaceutical exports, with West Asia and North Africa accounting for about $1.75 billion of India's pharma shipments annually. Shipping rerouting costs have risen. Insurance premiums for vessels operating in the region have surged. Hotel bookings for the IPL season have seen cancellations.

The ripple effects are wide, varied, and still unfolding.

Have We Been Here Before?

Yes. Multiple times.

In April 2024, when Iran launched its first-ever direct drone and missile attacks on Israel, the Nifty and Sensex fell about 1.5% in a single day. Brent crude jumped 5 to 7%. Aviation stocks fell 8 to 10%. But the selloff stabilised within days, and markets recovered.

In October 2023, when the Hamas attack on Israel triggered the initial Gaza conflict, Indian markets proved resilient, delivering gains of 10.5% over the subsequent three months.

In June 2025, during another Iran-related escalation, Indian markets actually delivered a 2.2% return over the following three months.

The pattern from six major geopolitical events between 1990 and 2026 shows that on average, these shocks lasted around four weeks and were followed by strong equity market recoveries. The Sensex's average three-month return after such events has historically been around 28%.

But there is an important caveat. The current conflict is of a different order. It involves direct US military involvement, the confirmed killing of Iran's supreme leader, the effective closure of the Strait of Hormuz, and a multi-front escalation that includes threats to NATO territory, the Red Sea, and the Indian Ocean. The 2026 episode is not a skirmish. It is shaping up to be a structural geopolitical shift.

The Question Everyone Is Sitting With

Nobody knows how long this lasts.

A sustained recovery in Indian markets will likely require a combination of geopolitical de-escalation, a stabilisation in crude oil prices, and a reopening of the Strait of Hormuz. None of those things look imminent as of today, March 16, 2026.

The Nifty is down nearly 8% this month. Over 400 stocks have shed double digits. The rupee is at record lows. FIIs are selling. Oil is near $100. 

But here is the thing about markets. They do not crash because bad things happen. They crash because uncertainty reaches a point where investors cannot see through to what comes next. History suggests that when the fog eventually lifts, whether through a ceasefire, a diplomatic breakthrough, or simply the conflict burning itself out, Indian equities have tended to come back sharply.

Whether that pattern holds this time depends on how deep the current crisis goes. And that, for now, is a question only geopolitics can answer.

Data sourced from Ace Equity, BSE, NSE, ICICIdirect, Emkay Global, Geojit Investments, Religare Broking, Master Capital Services, Outlook Business, Business Standard, and Business Upturn. Market data as of March 16, 2026.

Disclaimer: This is not investment advice. Please consult your financial advisor before making any financial descisions.