Looking ahead, markets are likely to remain highly volatile and event-driven, with near-term direction largely contingent on developments in the Middle East, particularly the evolving situation around the Strait of Hormuz. Any prolonged disruption could keep crude prices elevated above the $100 mark, intensifying inflationary and current account pressures while sustaining a risk-off sentiment. FII flows, rupee movement, and global cues, including US dollar strength and broader market sentiment, will be key variables to monitor. Any signs of de-escalation or easing in crude prices could trigger short-covering or relief rallies, while renewed escalation may lead to further downside pressure.
Here are 5 factors that could decide market action on March 23:
1) US, Israel and Iran war
The conflict between Iran and the US-Israel alliance continued to escalate, with leaders on all sides warning that the situation could worsen further. On Saturday, Israeli military launched strikes on Iran and Beirut on Saturday, even as the U.S. moved to deploy thousands of additional Marines to the Middle East.
Last week, Iran accused Israel of striking facilities at its South Pars gas field and responded by threatening attacks on oil and gas assets across the Gulf. It launched missiles toward Qatar and Saudi Arabia, declaring energy infrastructure in Saudi Arabia, the UAE and Qatar as legitimate targets. Iran also claimed to have struck an LNG plant in Qatar.
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2) Crude oil hovers $110
Oil prices surged on Friday, closing at their highest levels in nearly four years, after Iraq declared force majeure on all oilfields operated by foreign firms and the Iran war intensified, with the U.S. preparing to deploy thousands of additional Marines and sailors to the Middle East. Brent crude futures for May rose $3.54, or 3.26%, to settle at $112.19 per barrel, the highest level since July 2022. U.S. West Texas Intermediate crude futures for April, which expired on Friday, gained $2.18, or 2.27%, to settle at $98.32. Meanwhile, the more actively traded second-month U.S. crude contract ended at $98.23, up 2.8%.
Markets have been rattled as the escalating conflict in the Middle East has disrupted shipping and energy exports through the crucial Strait of Hormuz. This narrow chokepoint between Iran and Oman normally carries around one-fifth of the world’s crude oil and liquefied natural gas supplies. In practical terms, oil equivalent to nearly 20% of global demand passes through the strait every day. With the waterway effectively shut for the past seven days, roughly 140 million barrels of oil, about 1.4 days of global demand, has been prevented from reaching international markets.
3) FII exodus continues
As per provisional data from NSE, foreign institutional investors (FIIs/FPIs) remained net sellers, with purchases worth Rs 28,496.17 crore against sales of Rs 34,014.56 crore, leading to a net outflow of Rs 5,518.39 crore. In contrast, domestic institutional investors (DIIs) were net buyers on March 20, 2026, purchasing shares worth Rs 22,938.31 crore and selling Rs 17,232.08 crore, resulting in a net inflow of Rs 5,706.23 crore.
Foreign portfolio investors (FPIs) continued their selling spree in the Indian equities, pulling out Rs 52,703 crore in the fortnight ended March 15, underscoring a sharp risk-off sentiment amid global uncertainties and rising macro headwinds.
“The weakness in global equity markets following the war in West Asia, the steady depreciation of the rupee and concerns surrounding the impact of high crude price on India’s growth and corporate earnings contributed to the concern of FPIs,” Dr. VK Vijayakumar, Chief Investment Strategist, Geojit Investments said.
4) Rupee hits record low
The Indian rupee plunged as much as 110 paise Friday, recording its steepest single-day rout since late 2022, after oil surged amid an unrelenting barrage of attacks by either side on respective energy installations in West Asia. It slumped to a historic low of 93.73 amid a report New Delhi paid a significant price premium for its Thursday oil supplies before the unit closed at 93.71/$.
The pace of decline was rather quick, seemingly compensating for the Thursday trading holiday in Mumbai, with traders saying that market estimates of the central bank’s short dollar positions and sustained sales of Indian equity assets by overseas investors further pressured the rupee, which has lost more than 2.5% since the start of the Iran war.
5) Weak technical set up
From a technical standpoint, Nifty 50 is attempting to stabilize near the 23,000–23,200 support zone following the recent sharp correction. However, the index continues to trade below key resistance levels, indicating that the broader structure remains weak. A decisive break below 23,000 could accelerate selling pressure, potentially dragging the index toward 22,700–22,500, with further downside risk extending toward 22,000–21,800. On the upside, 23,300–23,400 remains the immediate resistance zone, while 24,000 stands as a stronger hurdle, and only a sustained move above this level would signal any meaningful recovery. Momentum indicators remain weak, with RSI hovering near oversold territory and MACD remaining in negative territory, suggesting that any bounce is likely to remain limited.
(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)