Iran war ending could boost Indian stock markets as lower crude oil prices ease inflation and improve investor sentiment, Amundi says

Amundi sees an end to the Iran war as a potential turning point for Indian equities amid high oil prices, foreign outflows and subdued earnings growth.

Amundi Investment Institute sees a potential recovery in Indian equities if the US-Iran conflict ends, with lower crude oil prices and improving investor sentiment offering relief after a steep market selloff.

As a major oil importer, India is vulnerable to rising energy costs, which can increase its import bill and put pressure on the rupee. (REUTERS) (Representative Image)

An end to the Iran war could prove a turning point for Indian stock markets, given the country's dependence on oil imports, according to Amundi Investment Institute, the research arm of French asset manager Amundi SA.

Alessia Berardi, head of global macroeconomics and emerging markets strategy at the institute, said she was optimistic about the outlook for Indian equities, citing improving private investment and economic indicators.

“I’m quite positive,” Berardi said in an interview in Mumbai last week, adding that the end of the conflict could be a “tipping point” for global investors considering Indian markets, Bloomberg reported.

How an end to the Iran war could benefit Indian markets

The conflict has put pressure on India since late February, with disruptions to oil supplies through the Strait of Hormuz pushing up crude prices and inflationary concerns. As a major oil importer, India is vulnerable to rising energy costs, which can increase its import bill and put pressure on the rupee.

A sustained decline in crude prices following an end to the conflict could ease some of these pressures, potentially improving the outlook for corporate earnings and investor sentiment. Lower oil prices could also reduce input costs for businesses that depend on fuel and petroleum-derived materials.

India's crude oil import dependency stood at 88.6% during April-January of the 2025-26 financial year, according to the government's February 2026 Monthly Economic Review. The report also noted that higher crude prices can feed into domestic inflation by raising fuel costs and weakening the rupee.

The impact on equities, however, would depend on how oil prices respond to any resolution, whether supplies through the Strait of Hormuz return to normal and how investors assess India's earnings outlook.

Indian shares rallied in May as hopes of a US-Iran peace agreement pushed crude prices lower. Reuters reported on May 25 that the Nifty 50 rose 1.32% and the Sensex gained 1.42%, while Brent crude futures fell 5.5% to $97.80 a barrel.

Why Indian stocks have been under pressure

Berardi's optimism comes after a difficult year for Indian equities. The benchmark NSE Nifty 50 index has fallen nearly 14%, making it one of Asia's weaker-performing markets, as subdued earnings growth and more than $30 billion in foreign investor outflows weighed on stocks and the rupee.

An end to the conflict could help improve perceptions of India's economic outlook among global investors. However, a revival in foreign inflows is not assured, as investors will also consider corporate earnings, valuations and opportunities in other markets.

India's growth outlook has remained relatively resilient despite the external pressures. The Reserve Bank of India raised its growth forecast for the current financial year to 7.1%, from 6.7%, while the economy expanded 7.8% in the April-June quarter, supported by domestic demand, Bloomberg reported.

Berardi said she was more optimistic about India than the prevailing market sentiment suggested, pointing to the potential for stronger economic performance.

Which sectors could benefit

Beyond the broader market outlook, Berardi favours companies linked to India's defence and manufacturing sectors, which have outperformed as the country expands domestic equipment production.

An index of defence stocks has gained more than 16% this year, outperforming global peers.

The potential benefits of an end to the war would not necessarily be uniform across sectors. Lower oil prices could ease costs for fuel-intensive businesses and companies that use petroleum-based raw materials, while the performance of individual stocks would continue to depend on earnings, valuations and other sector-specific factors.