Iran on Sunday said it will no longer abide by any of the limits imposed by 2015 nuclear deal, sparking fears of a military conflict.
Sensex fell nearly 700 points while the fear index, VIX shot up 17 per cent owing to the events unfolding after a US drone attack. In response to the killing of one of Iran's most powerful military commanders, General Qassem Soleimani, sending global financial markets into a tailspin ever since.
At 12.37 p.m., Sensex was down 633 points at 40,830.72. It opened at 41,378.34 from its previous close of 41,464.61. The broader Nifty slipped 195.55 points or 1.60 per cent to 12,031.10.
Except for IT stocks, which benefited from the sharp decline in the value of rupee against the US dollar, all other sectoral stocks traded with heavy losses.
The Indian rupee lost over 25 paise against the US dollar and surpassed the Rs 72 a dollar mark on Friday.
Meanwhile the prices of safe haven assets continued to edge up. Gold prices on Friday touched a record high of Rs 41,030 per 10 gram (February gold futures).
Besides, Iraq's parliament urged its leaders to expel troops from the US-led coalition after the US killed the high profile Iranian general Qassem Suleimani.
In a series of aggressive tweets, US President Donald Trump said: "They (Iran) attacked us, & we hit back. If they attack again, which I would strongly advise them not to do, we will hit them harder than they have ever been hit before!
".. If Iran attacks an American Base, or any American, we will be sending some of that brand new beautiful equipment their way...and without hesitation," Trump said.
( With inputs from IANS )