Stock Market Crash: Nifty Falls Below 25,000, Sensex Falls Nearly 800 Points — Key Drivers Behind Decline

The benchmark indices fell 1% after US' strike on Iran raised concerns that Iran may block the shipping access in the Strait of Hormuz. Nifty fell below 25,000, while Sensex was down nearly 800 points.

The broader segment of the market was also negative, as the Nifty Midcap 150 was down 0.30% and the Smallcap indices were 0.33% lower.

Closure of the Strait of Hormuz is an immediate concern to markets, according to Steve Englander, global head of G10 FX Research & North America Macro Strategy, Standard Chartered Bank.

"The markets are being very careful not to price in only the worst-case scenario. This is a unique geopolitical event, and the market is behaving as though the 'fat tails' aren’t as fat as they usually are," he said.

Nifty 50 fell 1.15% to decline to the 24,824.85 level, while Sensex was down 1.13% to 81,476.76.

Volatility index VIX rose over 4.59% on Monday.

"For India, the near-term outlook remains cautious. Until clarity emerges, the Nifty and Sensex will oscillate between oil shocks and sporadic relief rallies, but the undertone is unmistakably defensive. The real test isn’t just navigating volatility; it’s recalibrating for a world where external risks now dictate market logic," said Tarun Singh, managing director and founder, Highbrow Securities.

Over the weekend, the US conducted strikes on Iran's nuclear sites, following Israel's military operations targeting Iran's nuclear power plant sites, which led to retaliatory airstrikes by Iran on Israel. This geopolitical turmoil has significantly impacted global financial markets.

European futures were trading lower, indicating a lower open, while Asian stocks were trading mixed. US futures were also trading low with S&P 500 futures down 0.3% and Nikkei 225 futures 0.2% lower. Japan's Topix fell 0.4%, while Australia's S&PASX 200 was down 0.4%. Hong Kong's Hang Seng also declined 0.1%. In contrast, the Shanghai Composite rose 0.2%.

Wall Street ended the last week with losses, as geopolitical tensions continued to mount with the escalation in the Iran-Israel war. S&P 500 index closed 0.2% lower at 5,967.84 and Nasdaq 100 index ended 0.4% down at 21,626.39. Dow Jones Industrial Average rose 0.8% to 42,206.82.

The Indian rupee opened 15 paise weaker against the US dollar on Monday, trading at 86.74 compared to its closing rate of 86.59 on Friday, according to Bloomberg.

This decline comes amid heightened geopolitical tensions between Israel and Iran, which has cast a shadow over global markets.

The US dollar index rose to 99 after dipping to 98.6 on Friday, maintaining its weekly gains as the Israel-Iran conflict bolstered safe-haven demand.

Brent crude, the global benchmark for crude oil, saw a 5.70% increase at intraday, reaching $81.40. This surge was driven by supply risks following Iran's warning of the potential closure of the Strait of Hormuz, a crucial passage for 20% of the world's oil supply. The escalating conflict has heightened concerns over oil supply disruptions.

The Brent crude had slipped below $59 in May, the lowest level since February 2021. In the last two months crude prices have tumbled to four-year low, amid US President Donald Trump's tariff wars.