The Indian stock market benchmark indices, Sensex and Nifty 50, are likely to witness short-covering on Thursday after a sharp overnight sell-off in the previous session, as investors assess the impact of the escalating US-Iran conflict in the Middle East and rising crude oil prices.

Asian markets traded higher, while the US stock market closed on a mixed note overnight as renewed tensions in the Middle East kept investors cautious.

Investors triggered a broad-based sell-off on Wednesday, causing the Indian stock market to plunge amid escalating tensions between the US and Iran and a sharp rise in crude oil prices.

Domestic Market Recap

On Wednesday, Indian indices ended red:

• Sensex crashed by 1,677.12 points (2.15%) to close at 76,503.60.
• Nifty 50 moved down by 516.65 points (2.12%) to settle at 23,882.05

Gift Nifty

Gift Nifty was trading near 23,990, around 78 points higher than the previous Nifty futures close, hinting at a positive start for Indian markets.

Overnight Wall Street Performance

The US stock market closed on a mixed note on Wednesday after US President Donald Trump declared that the interim agreement aimed at ending the war with Iran was “over,” sending crude oil prices sharply higher and keeping investors on edge.

• The Dow Jones Industrial Average slumped by 576.76 points (1.09%) to close at 52,348.39.
• S&P 500 was down by 21.14 points (0.28%), ending at 7.482.71.
• The Nasdaq Composite was higher by 51.96 points (0.20%), finishing at 25,870.65.

Crude Oil Prices

• Brent crude gained by 1.03% to $78.82/barrel
• US West Texas Intermediate (WTI) crude was trading 0.98% higher at $74.24/barrel

Overnight Major Global Events Driving Sentiment

1. US-Iran War: The US military launched fresh strikes against Iran to ensure the Strait of Hormuz remains open for global shipping, just hours after US President Donald Trump declared that the interim agreement to end the conflict was “over.”
2. US Fed Meeting Minutes: Minutes from the US Federal Reserve’s June policy meeting showed that some officials supported raising interest rates, citing persistent inflationary pressures driven by the Middle East conflict. According to AFP, a few policymakers argued that elevated inflation and a resilient labor market justified increasing the federal funds rate target range.
3. IMF Cuts Global Growth Forecast: The International Monetary Fund (IMF) lowered its global economic growth forecast for 2026 to 3.0% from the 3.1% projected in April, saying the AI-driven economic boost has not fully offset the impact of the Middle East conflict. While the IMF continued to rank India among the world’s fastest-growing major economies, it trimmed the country’s FY2027 GDP growth forecast to 6.4% from the 6.5% estimate released in April.
4. Treasury Yields: US Treasury yields climbed to multi-week highs as surging crude oil prices fueled inflation concerns. The benchmark 10-year Treasury yield rose to a seven-week high of 4.597%, while the 30-year bond yield reached 5.067%, its highest level in seven weeks. Meanwhile, the two-year Treasury yield advanced to a two-week high of 4.235%.

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