Apart from this, data showed that retail sales in the US was higher than expectations in March, strengthening the case for the Fed to hold rates steady for longer, as this comes after earlier data pointing to strong labour market and hotter-than-expected inflation.

The news of Iran-Israel tension has come at a time when the market was hovering around record-high levels and valuations were rich, said Vinit Bolinjkar, head of research at Ventura Securities. He added that investors are weighing in possibility of a global economic slowdown due to the geopolitical risks if crude prices spike, leading to the ongoing selling in the market.

Nevertheless, Indian equities fared better than other major Asian and European markets on Tuesday as they were down 1-2.5%.

Market participants expect the risk-off sentiment to continue going ahead until clarity emerges on the crisis in West Asia. Back in the US, Fed chief Jerome Powell is scheduled to speak at an event late Tuesday, which will be keenly watched by investors, analysts said. Indian equity market will be shut on Wednesday on account of Ram Navmi.

“Investors are fearing that the ongoing conflict could fuel buoyancy in crude oil prices and in turn weigh on inflation. It seems bear machete is likely to rule the roost in Thursday’s session as well, with downside risk to benchmark Nifty still seen till the psychological 22,000 mark,” said Prashanth Tapse, senior VP (Research) at Mehta Equities.

While Brent Crude oil continued to hover around $90 per barrel on Tuesday, the yield on benchmark US 10-year bond was at 5-month high at 4.64%.

Shares of information technology (IT) companies were the worst hit on Tuesday as higher interest rates and sticky inflation in the US and Europe does not bode well for them as investors await a recovery in demand, what has been weak for over a year now.

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