Sensex Cracks 1,000 Points, Nifty Breaches 23,400 Amid West Asia Jitters, Depreciating Rupee

Equity benchmark indices traded lower in early session on May 18 as oil prices rose after a drone attack on the Barakah nuclear power plant in the United Arab Emirates (UAE), raising concerns that tensions in the region could worsen further.

At 9:50 AM, the Nifty 50 fell as much as 326.40 points, or 1.38 per cent, to 23,317.10, while the Sensex plunged 1,057.73 points, or 1.40 per cent, to the day's low at 74,180.26.

Investors remained cautious amid fears that further escalation in West Asia could disrupt global oil supplies and keep crude prices high.

UAE officials said they were investigating the drone strike on the Barakah nuclear power plant and warned that the country reserved the right to respond to such attacks. Meanwhile, Saudi Arabia said it intercepted three drones entering from Iraqi airspace and said it would take necessary steps to protect its sovereignty and security.

India strongly condemned the drone attack on the Barakah nuclear power plant in the UAE, calling it a “dangerous escalation”, and urged all sides to return to dialogue and diplomacy amid rising tensions in the region.

In a statement issued on Monday, the Ministry of External Affairs said, “India is deeply concerned at the attack targeting the Barakah nuclear facility in the UAE. Such actions are unacceptable and represent a dangerous escalation. We urgently call for restraint and a return to dialogue and diplomacy.”

The broader market also witnessed intense selling pressure. Market breadth remained decisively weak, with 2,541 stocks declining against just 440 advances on the National Stock Exchange (NSE). Data showed 55 stocks hitting their 52-week lows, while 120 counters were locked in lower circuits. In contrast, only 40 stocks touched 52-week highs and 39 stocks hit upper circuits.

Barring IT, all sectoral indices were in red. Nifty Consumer Durables was the top sectoral loser, falling nearly 3.50 per cent, while Nifty PSU Bank, Nifty Realty, and Nifty Media fell more than 2 per cent each. Nifty Auto, Nifty Financial Services, and Nifty Oil & Gas were down between 1 per cent and 2 per cent. Pharma, FMCG and Healthcare were also in the negative zone.

The Nifty Midcap 100 was down about 1.50 per cent and the Nifty Smallcap 100 was lower by more than 2 per cent. Nifty 500, which represents about 92 per cent of the free float market capitalisation of the stocks listed on the NSE, was also down by about 1.30 per cent.

Trump's Warning To Iran Adds Fresh Pressure

US President Donald Trump's warning to Iran to act quickly on stalled negotiations, saying time is running out, further dampened the sentiment.

“For Iran, the Clock is Ticking, and they better get moving, FAST, or there won’t be anything left of them. TIME IS OF THE ESSENCE!” Trump wrote in a post on Truth Social.

According to reports, the US has asked Iran to hand over nearly 400 kilograms of enriched uranium and limit nuclear operations to just one facility. Washington also wants Iran to drop its demand for compensation related to the conflict. Reports further said the US does not want to unfreeze most Iranian assets immediately and wants the conflict to end only after negotiations are completed.

Iran, meanwhile, has set its own conditions for restarting talks. Tehran wants military action in the region to stop and sanctions to be lifted. It has also demanded the release of frozen assets, compensation for war-related damage and recognition of its control over the Strait of Hormuz.

The escalating tensions fuelled concerns over potential disruption in crude oil supplies, putting pressure on equity markets globally, including India.

The international benchmark Brent crude oil futures rose up to 2.43 per cent to $112 a barrel, while the US oil benchmark West Texas Intermediate (WTI) crude oil futures jumped 3.30 per cent to $104.36 per barrel.

Rupee Weakens To A New Record Low

The rupee slipped to a fresh record low on May 18 as high crude oil prices due to the ongoing US-Iran war pushed global bond yields higher and weakened investor sentiment toward riskier assets.

The rupee fell nearly 0.30 per cent to 96.26 against the US dollar, crossing its previous all-time low of 96.1350. It has now touched record lows for five straight sessions, making it Asia’s worst-performing currency in 2026.

Since the Iran war began, the rupee has weakened 5.5 per cent as rising oil prices increased concerns over India’s import bill, inflation and economic growth. India is the world’s third-largest crude oil importer, making the economy highly sensitive to volatility in energy prices.

The pressure on the rupee intensified after global bond yields surged. Bond yields rise when investors sell bonds, and the recent jump reflects fears that expensive crude oil could keep inflation elevated for longer across major economies.

The benchmark US 10-year Treasury yield climbed to around 4.62 per cent, while the 30-year Treasury yield briefly surged above 5 per cent. Higher US bond yields make American assets more attractive to global investors, leading to stronger demand for the dollar and outflows from emerging markets such as India.

Markets are also worried that persistent inflation could force the US Federal Reserve to keep interest rates higher for longer, reducing the chances of aggressive rate cuts this year. That has further strengthened the dollar and added pressure on emerging market currencies.