Iran Standoff Pushes Oil Toward $110 a Barrel, Rattling Indian Markets and Squeezing US Businesses

The Numbers Out of India Are Ugly

On Tuesday, September 15, India's Nifty fell 279.50 points, or 1.19%, closing at 23,118.60, its lowest level since April 6, 2026, according to The New Indian Express. The Sensex dropped 777.94 points, or 1.04%, to 74,003.82. Smaller stocks got hit harder: the Nifty Midcap 100 fell 2.12% and the Nifty Smallcap 100 fell 2.43%.

The damage to wealth was real. BSE-listed market capitalization fell from Rs 483.10 lakh crore on Friday, September 11, to Rs 473.62 lakh crore on Tuesday, wiping out roughly Rs 9.50 lakh crore in a single session, per The New Indian Express.

Brent crude rose 2.3% that day to around $108 a barrel on US-Iran tension, the paper reported. Vinod Nair, head of research at Geojit Investments, said domestic markets stayed under pressure "as elevated crude oil prices and rising global bond yields weighed on sentiment," with investors bracing for tighter policy from major central banks.

India's 10-year government bond yield climbed 7 basis points to 7.09%, a four-month high. The rupee fell to 95.96 against the dollar, down 40 paise and its fifth straight losing session.

By September 19, ET Now reported foreign portfolio investors had pulled Rs 20,974 crore out of Indian equities for the month, reversing two straight months of buying: Rs 20,200 crore in July and Rs 29,631 crore in August. Pabitro Mukherjee, deputy vice president of research at Bajaj Broking, said Brent had surged toward $109.90 a barrel, bond yields rose, the rupee weakened, and a hawkishly tightening Federal Reserve added to the pressure. For all of calendar year 2026, foreign investors have now pulled a cumulative net Rs 2.45 lakh crore, according to National Securities Depository data cited by ET Now, well above the Rs 1.66 lakh crore withdrawn in all of 2025.

Domestic institutional investors have kept buying through the chaos. NSE data compiled around September 10-11 showed DIIs net purchased over Rs 23,000 crore for the month, cushioning the fall even as FIIs briefly turned net sellers on individual sessions. Economic Times separately reported analyst Garima Kapoor's forecast that India could see 50 basis points of rate hikes in 2026 as the Fed tightens, adding another headwind for equities.

American Businesses Say This Is Worse Than COVID

The pain isn't confined to Mumbai's trading floor. CNN Business reported that Jeff Vojta, CEO of Dilworth Coffee in Raleigh, North Carolina, has weathered a bad Brazilian coffee crop in 2024, Trump's 2025 global tariffs, and now the Iran war layered on top of a Super El Niño. "Between shipping disruptions, the lack of containers, high costs because of what's going on in the Red Sea and higher fertilizer costs, we have this period of disruption that we've never encountered before," Vojta told CNN. "There's just so much uncertainty."

Jack Buffington, who directs the supply chain program at the University of Denver, told CNN this is "a bigger problem than Covid, for sure... This is completely different. This is an energy problem." A closely watched Institute for Supply Management survey found business leaders comparing the current climate to the pandemic and concluding COVID was actually better, per CNN.

CNN reported diesel prices have doubled since March as the war in the Middle East intensified, and that core inflation, which strips out food and energy, rose last month by the most since April. Once services prices go up, they tend to stay up.

Trump's Bet Against the Data

President Trump has argued the pain is temporary. "Oil prices will drop precipitously" once the war with Iran is won, he wrote in a Labor Day Truth Social post, adding "it will all happen quickly."

There's a real precedent for that claim. CNN noted that in mid-June, when the US and Iran signed a memorandum of understanding that briefly reopened the Strait of Hormuz, gas prices fell below $4 a gallon and oil dropped below pre-war levels. House Speaker Mike Johnson made the same case in a Wednesday press briefing: "When we get that thing resolved in the Strait of Hormuz, that will have a direct effect on that, and it will help to bring down grocery costs."

A ceasefire would resolve the Iran component. But CNN's reporting shows the coffee and diesel price problems aren't purely an Iran story. Vojta's own list of cost drivers includes tariffs Trump imposed in 2025, a bad harvest that predates the war, and weather patterns tied to El Niño. A ceasefire wouldn't touch any of those.

As of Sunday, September 20, Fox News reported Trump told chief foreign correspondent Trey Yingst he's in "deciding mode" on Iran and that "very big things" are coming if Tehran doesn't change its behavior, while also saying he's open to meeting the Iranian president. No timeline or specifics on what those "very big things" might be have been announced. Until there's an actual resolution, business owners like Vojta and traders in Mumbai are stuck making decisions in the dark.