Markets Brace for Turbulent Expiry as Iran Tensions Rattle Sentiment

Indian equity markets are heading into a highly volatile derivatives expiry on Tuesday, as escalating tensions surrounding the Iran conflict weigh heavily on investor sentiment. Concerns intensified after U.S. President Donald Trump issued a deadline for Tehran to reopen the Strait of Hormuz or face potential strikes on critical infrastructure. Iran’s warning of retaliatory attacks on energy and water assets across the Gulf has further unsettled global markets, pushing investors toward expensive hedging strategies.

Reflecting the uncertainty, at-the-money options on the Nifty 50 expiring Tuesday indicate a potential move exceeding 2%, significantly higher than typical pre-expiry expectations. The Nifty Volatility Index has surged to its highest level in nearly two years, signalling heightened risk perception. Analysts note that the sharp rise in implied volatility, particularly in out-of-the-money put options, underscores fears of deeper market swings amid the geopolitical standoff.

The benchmark Nifty 50 fell 2.5% to 22,506.40 on Monday, hovering near a one-year low, as foreign investors continued to pull out funds. Nearly $10 billion has been withdrawn from Indian equities since the conflict began, with overseas investors maintaining bearish positions in index futures. Market experts warn that the combination of geopolitical risks and sustained foreign outflows could keep volatility elevated in the near term.

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