SURGING CRUDE oil prices and supply disruptions triggered by the conflict in West Asia have hit the financial markets hard, with the rupee sliding 68 paise below the psychologically crucial 92-mark to 92.15 against the US dollar and the BSE’s benchmark index Sensex plunging another 1.40 per cent for the third successive session and ending below the 80,000 level in a nervous sell-off.With gas production coming to a halt in Qatar — India majorly depends on it for LNG supplies — and crude oil movement through the crucial Strait of Hormuz at standstill, the benchmark Sensex has plunged by 3.80 per cent to 79,116.19 and the NSE Nifty by 3.99 per cent to 24,480.50 since the US-Israel war against Iran started last Friday.The Sensex last fell below the 80,000 level in August 2025 amid trade tariff concerns and foreign institutional selling.Worried foreign investors have taken out over $2.12 billion (Rs 19,500 crore) from the stock market in the last three sessions, exchange data shows.Brent crude futures have surged more than 10 per cent in just a week, climbing to multi-year highs amid fears of supply disruption. Shipping traffic has slowed to a virtual standstill through the Strait of Hormuz. Almost a third of the world’s crude oil trade and 20 per cent of gas passes through this critical chokepoint.The conflict has broken the global crude supply chain. Any prolonged shutdown of this strategic passage threatens to push crude prices even higher and pull down the rupee and the markets further, and put inflationary pressures in the economy.Indicating the nervousness in the stock markets, the India VIX, which measures the volatility in the market, surged over 23 per cent to a nine-month high of 21.14. This reflects the uncertainty currently in the market, with investors scrambling to close their bets, as the direction of the market ahead remains hazy.Story continues below this adL&T shares plunged by nearly 10 per cent in the last three days as around 33 per cent of the engineering conglomerate’s order book constitutes orders from the Middle East. On Wednesday, selling also spread to other sectors, with Tata Steel, Tata Motors Passenger Vehicles and SBI Life Insurance falling 5-7% and ending as the worst-hit in the Nifty 50. Metal, realty and energy were among the key laggards.Investors have been concerned about the situation in the region, with the conflict deepening over the past few days and more parties becoming involved. A weak rupee, rising import costs, mounting inflationary pressures and a potential recalibration of monetary policy now loom large. What began as a distant geopolitical confrontation is fast developing into a direct economic challenge for the country.Analysts advise against knee-jerk reactions by investors. “We advise investors to avoid panic sell-off and adopt a disciplined, long-term perspective and exercise patience over the next several weeks, as current price levels may offer a strategic entry point for the medium to long term,” said an analyst of a top broking firm.If the conflict drags on for a substantial period, crude oil prices will also remain elevated, hurting India Inc substantially, according to global investment firm CLSA. Crude prices have now already crossed the $75 a barrel mark, and may cross the $100 a barrel mark if the conflict is prolonged. Brent crude oil futures have surged nearly 19 per cent in the last four sessions to over $83 per barrel. Some experts expect this to cross the $100 per barrel mark if the instability in the West Asian region is prolonged.Story continues below this adEstimates are that a $1 rise in crude oil increases India’s annual import bill by roughly $1.5–2 billion, depending on total import volumes. This directly widens the current account deficit (CAD). India’s CAD increased to $ 13.2 billion (1.3 per cent of GDP) in the third quarter of 2025-26 from $ 11.3 billion (1.1 per cent of GDP) in the same period of last year, according to the RBI data.Companies with foreign currency borrowings face a sharper blow, as servicing overseas debt becomes costlier in rupee terms. Higher crude oil prices are also likely to hit corporate earnings across a host of sectors, with the extent depending on the sector’s dependence on the key commodity.As foreign Institutional Investors, who account for a significant share of trading activity in Indian markets, measure returns in dollar terms, a falling rupee diminishes those returns when funds are repatriated. The result can be bouts of FII selling, adding pressure on stock prices and amplifying market volatility.Experts say India’s IT services majors, pharmaceutical exporters and specialty chemical manufacturers are among the principal beneficiaries. Their billing is largely denominated in dollars and euros, while employee costs and operating expenses remain predominantly domestic. A softer rupee therefore enhances profitability without any immediate change in volumes. In an environment where global demand remains uneven, currency support can provide a timely earnings buffer.