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Markets trade deeply in red after gap-down start amid fresh US-Iran tensions
May-18-2026

Indian equity benchmarks made gap-down opening on Monday as oil prices increased to trade above $111 mark on renewed tension between the US and Iran. A drone strike caused a fire at a nuclear power plant in the United Arab Emirates. Weak global cues and concerns over inflationary pressure from higher energy prices also added pressure on market sentiments. Sensex crashed over 850 points, while Nifty slipped below 23,400 mark in early deals. Traders were concerned as foreign investors continued to pare their exposure to Indian equities, withdrawing Rs 27,048 crore so far this month (May 2026), indicating cautiousness among global investors amid an evolving global macroeconomic and geopolitical environment.

On the global front, Asian markets declined amid concerns over the war in West Asia following Trump’s fresh warnings. US President Donald Trump reportedly said that the time is ‘ticking fast’ for Iran, and warned that if Tehran does not make a decision soon, nothing will be left. Moreover, the meeting between Trump and his Chinese counterpart Xi Jinping failed to bring clarity on how and when the war in West Asia will cease. 

The BSE Sensex is currently trading at 74358.30, down by 879.69 points or 1.17% after trading in a range of 74276.03 and 74807.97. There were 3 stocks advancing against 27 stocks declining on the index.

The only gaining sectoral indices on the BSE were TECK up by 0.23% and IT up by 0.08%, while Consumer Durables down by 2.33%, Realty down by 2.22%, Metal down by 2.21%, PSU down by 2.09%, Basic Materials down by 1.98% were the top losing indices on BSE.

The few gainers on the Sensex were Infosys up by 1.01%, Bharti Airtel up by 0.41% and Tech Mahindra up by 0.22%. On the flip side, Tata Steel down by 4.34%, Power Grid down by 3.74%, Trent down by 2.34%, Adani Ports & SEZ down by 2.26% and SBI down by 2.18% were the top losers.

Meanwhile, Moody's Ratings, in a global report on geopolitical risks, has said that India and other major oil-importing nations (China, Japan and South Korea) are likely to pursue bilateral negotiations with Iran to secure energy supplies, potentially through coordinated transit corridors. However, it cautioned that a return to pre-war traffic volumes is doubtful in 2026. It noted that there is little prospect of a swift and lasting resolution between the US and Iran, and consequently, of the full reopening of the Strait of Hormuz. It said transit flows are likely to improve gradually, but through bilateral channels rather than a general reopening. This could lead to a modest increase in energy transit flows from the current near-zero levels, although the recovery process is likely to remain slow, opaque and vulnerable to disruptions.

It said even if safe passage in the Strait were to resume in the next six months, the oil market would remain supply-constrained, with persistently higher and more volatile energy prices and broader knock-on effects through costs, demand and financing conditions for exposed borrowers. In its May 12 report Moody's had noted that it expects Brent crude in the $90-110/bbl range for much of this year, with significant volatility, including occasional fluctuations outside this range in response to new developments. At sustained Brent prices of $90-110/bbl, Moody's estimates real GDP growth reductions of 0.2-0.8 percentage point for several major economies.

It said ‘India is among the most exposed, given around 46% of its crude oil imports come from the Middle East, its sensitivity to currency depreciation and pressure on its current account and fiscal management’. In its May Global Macro outlook, Moody's slashed India's GDP growth estimate for 2026 calendar year by 0.8 percentage points to 6 per cent. It expects inflation in India to average 4.5 per cent in 2026, up 1 percentage point from its earlier estimate. Further, it warned that persistently higher energy prices and scarcity of energy products will feed into headline and core inflation.

The CNX Nifty is currently trading at 23371.05, down by 272.45 points or 1.15% after trading in a range of 23347.35 and 23494.60. There were 5 stocks advancing against 45 stocks declining on the index.

The top gainers on Nifty were Infosys up by 0.95%, Bharti Airtel up by 0.40%, Tech Mahindra up by 0.25%, Coal India up by 0.16% and Wipro up by 0.05%. On the flip side, Tata Steel down by 4.30%, Power Grid down by 3.69%, Shriram Finance down by 2.31%, Trent down by 2.29% and Adani Ports & SEZ down by 2.24% were the top losers.

Asian markets were trading mostly in red; Nikkei 225 slipped 361.29 points or 0.59% to 61,048.00, Taiwan Weighted lost 352.98 points or 0.86% to 40,819.38, Hang Seng declined 350.73 points or 1.37% to 25,612.00, Jakarta Composite plunged 314.68 points or 4.68% to 6,408.64, Straits Times fell 24.82 points or 0.5% to 4,964.26 and Shanghai Composite weakened 9.04 points or 0.22% to 4,126.35. On the other hand, KOSPI increased 80.51 points or 1.07% to 7,573.69.
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