MUMBAI: With the Middle East conflict escalating into a full-blown war involving Iran, Israel, and the United States, investors are scrambling to reposition portfolios. While the broader market remains under pressure — Sensex down over 1,000 points — certain sectors are emerging as relative safe havens or direct beneficiaries of the geopolitical turmoil. Defence, upstream oil, metals, and traditional safe havens like gold are in focus [citation:1][citation:2][citation:3].
Defence: The biggest beneficiary
Defence stocks have been the standout performers amid the crisis, with the Nifty Defence index rallying over 2% even as broader markets slumped [citation:1][citation:7]. Shares of Paras Defence and Space Technologies surged more than 13% to ₹722.5, while Astra Microwave Products and Bharat Electronics (BEL) gained 5% and 2% respectively [citation:1][citation:7].
Why defence? Geopolitical conflicts typically drive expectations of higher global defence spending. Analysts at JM Financial believe defence names such as Hindustan Aeronautics (HAL) and Bharat Electronics (BEL) could see sustained sentiment support [citation:2][citation:4]. Additionally, India's deepening defence ties with Israel — following PM Modi's recent visit — offer potential export opportunities [citation:4].
Order book strength: BEL's unexecuted order book stands at ₹73,015 crore as of January 2026, providing strong revenue visibility [citation:7]. The government's focus on indigenous procurement under 'Atmanirbhar Bharat' adds structural support [citation:7].
Upstream oil: Direct beneficiaries of crude spike
Shares of upstream oil companies ONGC and Oil India (OIL) rallied up to 5% on Monday as Brent crude surged 13% to $82 per barrel — the biggest jump in four years — following the US-Israeli strikes on Iran and Tehran's retaliation [citation:3][citation:9].
Why upstream? Higher crude prices directly increase revenue per barrel for producers, boosting profitability and enabling higher exploration capex [citation:3]. According to JM Financial, every $1 per barrel increase in crude could lift ONGC's earnings per share by 1.5-2% [citation:2].
Risk to watch: The government may reimpose windfall taxes if crude stays elevated, though near-term earnings impact remains positive [citation:2].
Metals & mining: Riding commodity supercycle
Metal stocks have shown resilience, with the Nifty Metal index gaining 1.5% even as broader markets corrected. Higher crude typically pulls up other hard commodities, and expectations of Chinese stimulus add to the optimism [citation:2].
Top picks: Emkay prefers Hindalco Industries as exposure to non-ferrous metals. Systematix lists its top picks as Vedanta, NMDC, and Tata Steel [citation:2]. Steel and non-ferrous players are showing margin resilience through operational efficiencies and product mix [citation:2].
Traditional safe havens: Gold, IT, Pharma
Gold: Spot gold jumped 1.35% to $5,348 per ounce as investors sought safety [citation:5]. Analysts expect further upside if the conflict persists, with a potential test of $5,400 resistance [citation:8].
IT & Pharma: With the rupee under pressure and the dollar strengthening, IT exporters like Infosys and HCL Technologies could benefit from currency tailwinds. Pharma is a classical defensive sector, less sensitive to commodity cycles [citation:2].
Banks: Value plays amid volatility
Despite macro headwinds from higher oil prices (widening current account deficit, inflation), banks are seen as relatively safe due to reasonable valuations and a positive credit cycle [citation:2].
JM Financial's preferred banking names include ICICI Bank, Axis Bank, State Bank of India, City Union Bank, Ujjivan Small Finance Bank, and DCB Bank [citation:2]. These combine inexpensive valuations with improving asset quality.
- Defence: HAL, BEL, Paras Defence — sentiment support from conflict + strong order books [citation:2][citation:7]
- Upstream Oil: ONGC, Oil India — direct beneficiaries of $82/bbl crude [citation:3]
- Metals: Hindalco, SAIL, NMDC, Vedanta, Tata Steel — commodity upcycle + China demand hopes [citation:2][citation:8]
- IT: Infosys, HCL — currency tailwind from weaker rupee [citation:2]
- Pharma: Classical defensive; specific picks not named but sector seen as safe [citation:2]
- Banks: ICICI Bank, Axis Bank, SBI, City Union, Ujjivan, DCB — value + improving credit cycle [citation:2]
- Gold: Physical gold, sovereign gold bonds, gold ETFs — traditional safe haven [citation:5][citation:8]
Sectors to avoid
Oil marketing companies (OMCs) are the biggest losers from the crude spike. BPCL fell 4.7%, IOC dropped 5%, and HPCL slid 5.2% on Monday [citation:9]. JM Financial notes that every $1 per barrel rise above $70 can hit OMC gross marketing margins by ₹0.55 per litre and reduce consolidated EBITDA by 7-9% [citation:2].
Airlines, paints, tyre, and chemical stocks are also vulnerable due to input cost pressures [citation:6]. InterGlobe Aviation fell over 6% on Monday [citation:8].
Top stock picks for the Iran conflict (March 2, 2026)
| Company | Sector | Price (₹) | Change (%) | Analyst Target |
|---|---|---|---|---|
| HAL | Defence | 3,910 | +1% | ₹4,300 [citation:8] |
| BEL | Defence | 452 | +2% | ₹460 [citation:8] |
| ONGC | Upstream Oil | 293 | +5% | - |
| Oil India | Upstream Oil | 505 | +4.5% | ₹508 [citation:8] |
| Hindalco | Metals | 624.75 | +1.7% | - |
| SAIL | Metals | 165 | +0.9% | ₹175 [citation:8] |
Expert views: What next?
VK Vijayakumar, Chief Investment Strategist, Geojit Financial Services: "Experience tells us that panic selling during a crisis is the wrong strategy. Investors should refrain from selling and watch how things evolve. Weakness in the market can be used to slowly accumulate high-quality stocks in domestic consumption themes. Upstream oil companies are likely to outperform in a weak broader market environment." [citation:2]
JM Financial Institutional Equities: "Upstream energy and defence may see relative support. ONGC and Oil India benefit from stronger realisations, while defence names including HAL and BEL could see sentiment support." [citation:2][citation:7]
Anuj Gupta, SEBI-registered market expert: "The US-Iran war is expected to fuel uncertainty, and investors will look to gold and silver as safe-haven assets. If gold breaks above $5,400/oz, prices in India may touch ₹1,68,000-1,70,000 per 10gm." [citation:8]
Risks to monitor
While defence, oil, and metals offer opportunities, risks abound: (1) Strait of Hormuz disruption — over 40% of India's crude imports pass through this chokepoint; any closure could push crude above $100 [citation:3][citation:6]. (2) Windfall tax reimposition on upstream oil companies. (3) FII outflows — foreign investors sold ₹7,536 crore on Friday [citation:8]. (4) Technical weakness — 67% of Nifty 500 stocks are below 200-DMA, indicating bearish undertone [citation:5].
Key takeaways for investors
- Defence is the direct play: HAL, BEL, Paras Defence — conflict boosts sentiment, strong order books provide visibility [citation:1][citation:7].
- Upstream oil gains from crude spike: ONGC, Oil India — every $1 increase boosts EPS [citation:2][citation:3].
- Metals offer commodity upcycle exposure: Hindalco, SAIL, NMDC, Tata Steel — China demand hopes + supply constraints [citation:2][citation:8].
- Safe havens: Gold, IT, Pharma — gold hits record highs; IT benefits from weaker rupee [citation:2][citation:5].
- Banks as value plays: ICICI Bank, Axis Bank, SBI — reasonable valuations, positive credit cycle [citation:2].
- Avoid OMCs, aviation, paints: Directly hit by crude spike [citation:6][citation:9].
- Historical perspective: Past crises show markets recover within 6 months; corrections may offer entry points [citation:2].
Outlook: How to position
Analysts recommend a barbell approach: own defensive plays (upstream oil, defence) for near-term momentum, while accumulating quality domestic consumption stocks (banks, capital goods) on dips for long-term [citation:2]. Gold should be part of every portfolio as hedge against uncertainty [citation:8]. The key monitorables are crude oil prices, movement in the Strait of Hormuz, and FII flow reversal.
Disclaimer: The analysis and broker views are for information only. Please consult your advisor before taking positions.