Indian equity benchmarks fell sharply in early trade on Friday, reversing a two-day rally as escalating tensions between the United States and Iran dampened global investor sentiment.

The BSE Sensex dropped 926.92 points to 74,346.53, while the Nifty 50 declined 280.95 points to 23,025.50, reflecting a broader risk-off mood across markets.

The sell-off was driven by weak global cues and heightened geopolitical uncertainty, with the ongoing US-Iran conflict continuing to cast a shadow over financial markets. Elevated crude oil prices, hovering above the USD 100 per barrel mark, have further unsettled investors, particularly in import-dependent economies such as India.

Among Sensex constituents, major laggards included Bajaj Finance, Larsen & Toubro, Reliance Industries, InterGlobe Aviation and Bajaj Finserv. On the other hand, gains were seen in IT stocks such as Tata Consultancy Services, HCL Technologies and Tech Mahindra, along with retail firm Trent.

Markets across Asia presented a mixed picture. South Korea’s Kospi and Japan’s Nikkei 225 were trading lower, while China’s Shanghai Composite and Hong Kong’s Hang Seng index posted modest gains. Overnight, US equities ended sharply weaker, reflecting mounting investor anxiety.

Analysts said global sentiment has shifted decisively towards caution, with concerns extending beyond short-term volatility to broader macroeconomic risks. The tech-heavy Nasdaq Composite has entered correction territory, while the Dow Jones Industrial Average and the S&P 500 recorded their steepest single-day declines since the escalation of tensions in West Asia.

A key factor weighing on sentiment remains the lack of progress in resolving the US-Iran conflict. The resulting surge in crude oil prices has reignited inflation concerns globally, with Brent crude trading around USD 106 per barrel despite some intraday easing.

For India, higher oil prices pose a particular challenge due to the country’s heavy reliance on imports, potentially increasing input costs and widening the current account deficit.

Investor caution has also been reflected in continued foreign fund outflows. According to exchange data, Foreign Institutional Investors (FIIs) sold equities worth Rs 1,805.37 crore on Wednesday, while Domestic Institutional Investors (DIIs) provided some support by purchasing shares worth Rs 5,429.78 crore.

The latest decline comes after a strong rally earlier in the week, when markets surged on Wednesday before remaining closed on Thursday for the Ram Navami.

With geopolitical tensions persisting and oil prices remaining volatile, analysts expect markets to remain sensitive to global developments in the near term.

With PTI inputs