Sensex Stability Amid Middle East Conflict: Macro Resilience Explained

Key Points Explained (Human-Written):
Why Markets Stay Calm: India’s Triple Shield
Low Inflation & Stable Macros:
CPI at 3.2% (6-year low) and WPI at 0.39% (14-month low) reduce RBI’s rate-hike pressure.
Robust forex reserves ($650B+) and controlled fiscal deficit boost investor confidence.
Minimal Trade Links with Iran:
India’s crude imports from Iran dropped to near-zero since 2019 due to US sanctions.
Current reliance shifted to Iraq, Saudi Arabia, and Russia (45% combined).
Oil Prices Yet to Spike:
Israel hasn’t targeted Iranian oil installations (holding 12% of global reserves).
Stable Brent crude (~$85/barrel) prevents inflationary shocks.

Potential Triggers for Market Volatility:
If Israeli strikes hit Iranian oil facilities: Global crude prices could surge, raising India’s import bill (85% dependent).
WPI- Oil Link: Every 10% oil price rise → 0.9% WPI inflation spike (9% weight in basket).
Fiscal & External Risks: Higher subsidies (LPG/kerosene) and widened current account deficit (CAD).
 

Key Takeaways for UPSC Aspirants:
Macro Buffers: Low inflation, forex reserves, and fiscal discipline insulate markets.
Trade Diversification: Reduced Iran oil imports minimize direct conflict impact.
Oil Price Sensitivity: Stability hinges on avoiding Iranian supply disruptions.
Market Metrics: Sensex fell only 0.13% post-conflict (81,691 → 81,583).
Future Risks: Targeting oil infrastructure could spike CAD, inflation, and force RBI rate hikes.
 

Sample Q&A for Exams (Prelims/Mains):
Q: How does crude oil price rise affect India’s WPI inflation?
A: A 10% increase can raise WPI by 0.9% (oil products have >9% weight in WPI basket).
Q: Why has the Iran-Israel conflict minimally impacted Indian markets?
A: Low inflation (CPI 3.2%), zero Iranian oil imports, and stable global crude prices.
Q: Which regions supply most of India’s crude oil today?
A: Iraq, Saudi Arabia, and Russia (collectively ~45%); Iran’s share is negligible post-sanctions.
Q: What macroeconomic risks could arise if Israel attacks Iranian oil sites?
A: Higher CAD (oil imports = 25% of import bill), subsidy burdens, and inflationary pressure.
Q: How did Sensex respond to the Iran-Israel conflict outbreak?
A: Fell merely 0.13% (81,691 → 81,583), reflecting market confidence in India’s macros.