Indian financial markets are grappling with renewed uncertainty following the meeting between US President Donald Trump and Ukrainian President Volodymyr Zelenskiy, which concluded with a near altercation. Concerns over geopolitical stability have intensified, particularly regarding India’s economic relations with Russia and Western nations.

The prospect of shifting alliances could impact India's energy trade, broader exports, and currency stability. According to a report by Mint, India’s access to discounted Russian crude and its ability to re-export refined petroleum products to Europe may now be at risk.

Trump’s indication of reduced US support for Ukraine and closer ties with Russia could prompt European nations to reconsider sanctions on Moscow. If restrictions ease, Europe’s dependency on Indian refined petroleum exports could decline, potentially reducing a key revenue stream for India’s energy sector.

Beyond energy, trade flows between India and its Western partners may also be affected. Indian industries that benefited from supply chain disruptions—such as steel and fertilisers—could see declining demand if European markets adjust their stance on Russia.

Additionally, any recalibration of US-Russia relations introduces further risks for Indian companies with investments in Western economies. The Indian rupee faces heightened volatility as the US dollar strengthens amid global uncertainty. A stronger dollar raises the cost of imports, particularly crude oil, which accounts for over 85% of India’s energy requirements. Rising import costs could add to inflationary pressures, increasing household expenses and influencing future policy decisions by the Reserve Bank of India.

Foreign institutional investors (FIIs) have already been reducing their exposure to Indian markets, and analysts warn that the Trump-Zelinskiy meeting could exacerbate this trend. In recent weeks, FIIs have been net sellers, further weighing on market sentiment. The Nifty 50 index recently broke a crucial support level at 22,200, with forecasts suggesting a potential decline toward 21,250. Investors will be closely monitoring any intervention from the Indian government and central bank as geopolitical tensions remain high.

However, on the diplomatic front, India is unlikely to shift its stance from the neutral line of bringing a peaceful end to the war through dialogue. India alongside China was also one of the abstaining countries in a February 24 2025 draft-resolution vote at the UN tackling the issue of de-escalation and eventual resolution of the conflict.