Higher oil prices to rising bond yields: 5 key risks that could keep the Indian stock market under pressure in 2026

The benchmark Nifty 50 has delivered negative returns over the last two years, and investors expecting a swift recovery could be in for a disappointment as the domestic market faces a plethora of headwinds.

Swinging between highs and lows, the Nifty 50 has delivered a negative return of over 1% over the last two years (from 12 July 2024 to 13 July 2026).

Just when the market appears to be recovering, a fresh headwind either emerges or resurfaces to derail the rally. This time, it is the US-Iran conflict that has returned to puncture the nascent uptrend in the domestic market.

"I think there could be some short-term weakness that may pull the Nifty down by around 500–800 points from current levels. However, I believe things will eventually improve, and the market should recover from there. I don't see the situation deteriorating significantly beyond that," said Rohit Srivastava, the founder and market strategist at Indiacharts.com.

While the market remains hopeful that a durable resolution to the US-Iran conflict will trigger a sustained recovery, investors may be overlooking other risks, many of them stemming from the conflict itself, that could keep the market under pressure for the current calendar year. Let's take a look:

No one knows when and how the US and Iran will reach a final deal that will restore a durable peace in the Middle East.

As per reports, there are several bones of contention between them, including Tehran's nuclear programme, ballistic missile programme, the control of the Strait of Hormuz, and Iran's support for proxy groups across the Middle East.

There have been multiple diplomatic efforts to iron out these issues, but none have yielded lasting results.

For markets and economies like India, which imports about 85-90% of its total oil requirements, the situation in the Middle East remains a key monitorable.

"The ongoing geopolitical tensions, particularly in the Middle East, have increased concerns over crude oil supply and global trade. For India, higher crude prices can lead to increased inflation, higher import costs and pressure on corporate profitability. These uncertainties also make foreign investors more cautious, resulting in volatile capital flows," Ravi Singh, Chief Research Officer from Master Capital Services, noted.

"Until there is greater clarity on geopolitical developments, markets are likely to remain volatile. Investors should stay focused on quality businesses and avoid making decisions based on short-term market swings," Singh said.

The US 10-year bond yield is now near 4.60%, climbing over 4.5% so far this month. Rising bond yields are not good news for emerging markets like India.

When bond yields rise in developed economies, foreign investors tend to take their money out of riskier emerging markets and invest them into fixed-income assets back home.

In simple words, rising bond yields can aggravate foreign capital outflow from India and exert pressure on the stock market.

"Global markets are facing pressure from two major factors- rising bond yields in developed economies and increasing geopolitical uncertainty. When bond yields move higher in countries like the US, Japan and Europe, investors often shift a part of their money from equities to fixed-income assets, reducing the appeal of emerging markets," Singh explained.