Mumbai (Maharashtra) [India], July 8 (ANI): Indian equity markets closed sharply lower on Tuesday after comments by US President Donald Trump at the NATO summit sparked fresh geopolitical concerns, triggering a wave of risk aversion across global markets in the final hour of trading.

The benchmark Nifty 50 plunged more than 500 points, or over 2 per cent, to settle at 23,887.45, while the Sensex tumbled over 1,600 points, or around 2 per cent, to close at 76,555. Broader markets also witnessed heavy selling, with the Nifty Financial Services and Nifty PSU Bank indices emerging among the worst performers. India VIX surged over 28 per cent, signalling a sharp spike in market volatility.

The sell-off intensified after Trump, speaking at the NATO summit in Ankara, said, 'We attacked very powerfully last night against Iran. Iran shot rockets at ships, that's why US hit back.' He also remarked, 'Iran doesn't know what it's doing, they are incompetent,' and added, 'We wasted a lot of time with Iran,' fuelling fears of a renewed escalation in West Asia.

Trump also made a series of remarks on trade and defence, saying, 'Not happy with NATO regarding Greenland,' while criticising Spain by stating, 'Spain is a wasted cause, don't want to do trade,' and adding that he wanted to 'cut off all trade with Spain.' He further said, 'Greenland is a big problem,' and claimed, 'We pay far too much into NATO.'

Market participants said Trump's comments reignited concerns over a prolonged geopolitical conflict, pushing Brent crude prices nearly 4 per cent higher to USD 76.71 per barrel and weighing heavily on investor sentiment.

'The sudden collapse of the Memorandum of Understanding (MoU) between the US and Iran has triggered a sharp wave of risk-off sentiment across global financial markets, hitting Indian equities particularly hard,' said market and banking expert Ajay Bagga.

'President Trump's declaration that the peace process is 'over' injects severe geopolitical uncertainty back into the critical Strait of Hormuz transit corridor. With crude oil prices surging rapidly on renewed supply and security fears, India--as a major energy importer--faces a double whammy of imported inflation and fiscal pressure,' Bagga said.

He noted that investors rushed to reduce equity exposure as geopolitical risks escalated.

'Investors are aggressively shedding risk, leading to the sharp sell-off on Dalal Street today as the global market landscape rapidly recalibrates for a prolonged, volatile standoff in West Asia,' he added.

Bagga said markets were swiftly pricing in the possibility of further escalation.

'We still believe this is posturing from both sides to cater to their domestic compulsions, but the risk of escalation remains on the table and markets are pricing it in a hurry. Hopefully, the regional powers will prevail upon both the US and Iran to return to the negotiation table,' he said.

With crude oil prices rising and geopolitical tensions back in focus, Bagga expects market volatility to remain elevated until there are clearer signs of de-escalation.

At the time of filing, the Dollar Index edged up by 0.10 per cent to 101.1300, and the Rupee appreciated by 0.62 per cent to trade at 95.5600 against the US Dollar. (ANI)