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US-Iran War Shakes Markets - Should Investors Exit Gold & Silver and Buy Stocks Now?
Table of Contents
- US-Iran War & Market Impact
- Safe Haven Assets: Why Gold and Silver Are Losing Shine This Time
- Gold vs Stocks India: Which is Better During Geopolitical Tension?
- Benefits of Stocks
- The Case for a Silver Investment Strategy
- Market Volatility Strategy: Should You Exit Gold & Silver for Stocks?
- Conclusion
The impact of the war in Iran has annoyed investors in the US and the rest of the world since late February 2026, leading to the price of oil being greater than 100 dollars a barrel, resulting in more worries about inflation and more volatility in the stock market. The Nifty 50 and the Sensex in India were down 5-8 percent in the month of March, and have increased a little since, which has led many to worry about their investments.
The price of gold and the price of silver, which have long been seen as safe haven investments, have gold and silver not reacted as expected during the US-Iran crisis. The price of silver and gold went down 4-5 percent, and while the price of gold in the MCX has fallen to 1,55,000 and is currently down 2 percent, has led many to investors to pose the question of whether it is now the right time to leave the investments on gold and silver and move to stocks, or should you continue to hold gold and silver during the time of turbulence in the market.
This article breaks down the US-Iran war's impact on gold and stock investing in India, and provides a market volatility investing strategy. Overall, it provides a clear and concise approach for Indian investors.
US-Iran War & Market Impact
The US and Israeli attacks on Iran and subsequent disruption of the Strait of Hormuz have impacted the flow of oil globally, as approximately 25% of the entire world's oil supply moves through the Strait. With the beginning of the war, oil prices increased by over 40%, forcing inflation expectations to increase and central banks to cancel planned interest rate cuts.
In India, the impact was severe and immediate.
- Equity Markets: The Nifty 50 index almost hit 23,000, losing 2% of its value because of the attacks, before closing at 23,408. The Sensex index dropped below 75,000 at one point. India VIX spiked, and FIIs liquidated their positions.
- Currency Pressure: The Rupee's value dropped below 92 vs the USD, increasing the cost of oil and gold imports.
- Defence & Energy: The affected sectors were aviation, tourism, automobiles, and, to a lesser extent, the defense and energy sectors.
Although there are numerous impacts of the US-Iran war on markets, investors seem to have preemptively priced in a majority of the impact. Experts expect prolonged uncertainty to have the most negative effects; in contrast, a de-escalation would likely spur a relief rally. This geopolitical shock emphasizes the value of safe-haven assets and, equally, the reasons they can fail to meet expectations.
Safe Haven Assets: Why Gold and Silver Are Losing Shine This Time
In times of uncertainty, investors turn to safe-haven assets such as precious metals to protect their wealth. Gold, in particular, has a reputation for increasing in value during conflicts. Previous tensions in the Middle East saw gold prices increase by 5 to 10 percent.
However, in the case of the anticipated US-Iran conflicts, gold and silver prices have come down. Even with oil prices exceeding $100, gold and silver prices are not responding to the increase in oil prices. Why is that?
- Increased US treasury yields and a strong US dollar - Gold is bought as a haven asset, hence, gold becomes more expensive for international investors as the price of gold increases.
- Profit booking – gold and other precious metals have safe haven assets, hence people profit-booked their investments due to leveraged positions and margin calls.
- Inflation dynamics: inflation is driven by increasing oil prices. However, safe-haven assets are capped by a strong dollar and delayed rate increases by the Fed.
Many expected precious metals to rise in value during times of uncertainty but this was not the case. As tensions increased, silver on the MCX decreased by over ₹ 14,000 (5%). Many believe this is only a temporary adjustment, including Ponmudi R of Enrich Money. Tata Mutual Fund continues to view gold as a buy due to ongoing central bank purchasing and political conflicts.
For Indian customers, gold is usually bought due to cultural significance during occasions such as weddings, family gatherings, or even as an investment to preserve family wealth. However, given the current situation with the war, it is evident that gold is a safe haven asset and is not fully safe to invest in. There is a need for diversification.
Gold vs Stocks India: Which is Better During Geopolitical Tension?
India is home to the highest gold reserves in the world, with over 25,000 tonnes. Gold is generally considered a better investment in the West; however, due to the current US-Iran war impact situation, what does gold vs stocks India look like?
Benefits of Gold:
- Great for hedging against any currency weakness or inflation due to a spike in oil prices.
- During a period of prolonged uncertainty, equities tend to be more volatile than gold.
- There is a tax benefit on Gold- Gold ETFs and Sovereign Gold bonds in India also provide tax benefits. For some, there are long-term capital gains at 12.5% after indexation.
Benefits of Stocks
- Indian equities have given a return of 12-15% CAGR over decades. This is much better than gold at 8-10%, so even though there is a discount on gold, equities will be a better investment.
- With the recent sell-off, some quality stocks in the banking, IT, and defence sectors have become attractive for investment due to the low valuations.
- There is expected to be a rebound and Nifty 50 is expected to hold the 22,000 support. There is a high amount of put writing at that level, establishing a support level. Analysts are predicting a 5-8% increase in the index due to a decrease in war tensions.
The historical data provides several insights. During the Russia-Ukraine Crisis of 2022, gold prices initially increased, while stocks bounced back more quickly after the conflict's resolution. During the COVID Crash in India in March 2020, stocks fell over 30% while gold prices remained constant. However, in the following two years, the Nifty Index increased 100%.
There is no need for a heavy investment in any single asset. If gold is the most dominant asset in your portfolio, it may be wise to consider a shift towards equities. The Nifty 50 Index and other blue-chip stocks will offer some protection. The defence and information technology sectors may experience growth due to increased government spending and other global restructurings.
The Case for a Silver Investment Strategy
Silver often gets overlooked due to its safe-haven status, while its other role is that of an industrial metal. In this silver investment strategy amid the US-Iran war impact, consider the following:
- Silver is more volatile than gold: Margins for Silver prices are increased due to industrial demand, for example, solar panels, EVs, and electronics (50%+ of the usage).
- Current weakness: Silver has decreased significantly on the MCX, but specialists view it as a buying opportunity on remaining dips. Jigar Trivedi of IndusInd Securities says that after the `war premium dies`, industrial price depression will be recovered.- Portfolio role: Up to 10% of the overall portfolio Silver allocation. For active traders, Silver ETFs or Silver futures. For inactive long-term holders, physical silver or Silver ETFs are preferable.
Smart Silver Investment Strategy:
1. Buy on corrections. Current levels are optimal for entry below previous highs.
2. For Silver ETFs, use SIPs to average your cost for each unit during the phases of the market volatility strategy.
3. For Silver, along with Gold, use Gold to balance your portfolio, as Gold offers stability while Silver has a more aggressive growth potential.
Silver is best for the medium to long-term horizons (2-5 years) linked to the green energy recovery. If risk-averse, don’t overexpose yourself to Silver as it is not as safe of a haven as Gold.
Market Volatility Strategy: Should You Exit Gold & Silver for Stocks?
The question remains: Do investors exit gold & silver to buy stocks now? Experts are split, but the majority go for a more selective approach:
- Yes — book partial profits: Rakesh Bansal is in favour of gold/silver selling for stocks as the “market has discounted the US-Iran war.” Nifty put writers have positioned support at 22,000, while quality stocks are trading at a discount to their intrinsic value. Amit Goel has a positive outlook on Nifty 50 ETFs and recommends a 5-8% increase in the banking, IT, and data centre sectors.
- No — keep your hedges: Nikhil Aggarwal is in favour of maintaining 10-20% in gold/silver as a hedge against sustained inflation and a weakening rupee.
- Balanced view: Pearl Agarwal suggests an optimal mix of 30-35% equities (large caps), 35-40% debt (short duration funds), 10-20% gold/silver, and 5-10% cash for dips.
Practical Market Volatility Strategy for Indian Investors:
- Rebalance, don’t panic sell: When gold/silver crosses 20-25% of your portfolio, reduce by 5-10% and put that money into equities or debt.
- SIPs and STPs: Keep your equity SIPs going, and during dips, use STPs from debt to equity.
- Quality matters: Look for more resilient large caps in defence and domestic consumption.
- Temporary cash king: Hold 5-10% of your portfolio in cash for volatility spikes, so you can take advantage of buying opportunities.
- Trigger watch: Keep an eye on oil, FOMC, and the Strait of Hormuz. If the war de-escalates, equities could rally.
Conclusion
Both short-term suffering and opportunity have resulted from the US-Iran war. Gold and silver are still significant safe haven assets, thus it might not be a good idea to completely sell them. However, since markets have largely discounted the battle, it may be profitable to book partial profits and move strategically into equities using a smart market volatility strategy.
If you think there will be an industrial recovery, use a silver investment strategy during declines. Give gold a higher priority than stocks in India. For peace of mind, hold onto some gold, but let stocks power your long-term aspirations.
DISCLAIMER: This blog is NOT any buy or sell recommendation. No investment or trading advice is given. The content is purely for educational and information purposes only. Always consult your eligible financial advisor for investment-related decisions.
