Indian stock market traded in the deep red, with benchmark indices Sensex and Nifty falling more than 1% each as rising uncertainties around Iran-US war, persistent FII selling and other factors dampened investor sentiment.Sensex dropped more than 800 points to 73,840 while Nifty 50 fell around 200 points to 23,284, as seen at 9.30 am. This came as India VIX, which measures volatility in markets, jumped over 8% to 16.62 during trading hours.IT stocks lost steam today after a sharp bull run, with Tata Consultancy Services (TCS), HCL Tech, Tech Mahindra and Infosys shares falling 2-5% to lead losses on Sensex. Adani Ports meanwhile rose 1% to lead gains.The bearish sentiment was broad-based, with Nifty Midcap 100 and Nifty Smallcap 100 indices declining 0.7% and 0.5% respectively. Sectorally, Nifty IT tumbled 4% to lead losses. Around 1,634 stocks declined on NSE, while 913 advanced and 84 remained unchanged."The mild escalation in the West Asia conflict has again pushed up Brent crude price to close to $97 indicating no respite to India from the energy shock. The RBI commentary and actions on June 5 will be keenly watched by the market,” said VK Vijayakumar, Chief Investment Strategist at Geojit Investments.He added that the bull run in semiconductor giants South Korea and Taiwan continues unabated. “The giant companies like Samsung, SK Hynix and TSMC, who have huge pricing power, are expected to post hugely impressive profit numbers this year and perhaps next year. It is a fact that the bull run in these markets and in US and Japan are driven by expectations of high earnings growth,” he explained.In contrast, in India earnings growth in FY27 will be modestly weighed down by lower growth and higher inflation, Vijayakumar said, adding that all these factors have impacted sentiments in the market. “The saving grace is the confidence shown by the retail investors who continue to invest money despite the headwinds. Even though the sustained FPI outflow is a strong headwind, the fair valuations, the recovery in earnings growth reflected in Q4 numbers and the strong domestic flows can impart resilience to the market,” he concluded.Here are the key factors dampening sentiment on Dalal Street today:1) Iran-US tensions riseDespite US President Donald Trump's assurances that the United States and Iran are edging closer to ending their three-month-long war and reopening the Strait of Hormuz, tensions in the oil-rich Middle East continue to rise. Israel is continuing attacks on Lebanon, jeopardising fragile truce between Washington and Tehran, while Iran fired missiles at nearby countries.The US military meanwhile said on Tuesday that it had "successfully defeated" a series of Iranian missile and drone attacks in the Gulf and conducted self-defence strikes on the country's Qeshm Island. Centcom also said three attack drones launched by Iran "toward civilian mariners" had been hit.2) Oil prices riseAs a result of the tensions, oil prices rose. Brent crude futures gained nearly 1% to trade close to $97 per barrel. WTI Crude futures meanwhile also gained around 1% to trade near $95 per barrel. The increasingly fragile ceasefire in the Middle East raised worries over the prolonged closure of the Strait of Hormuz, a narrow 33-kilometre waterway connecting the Persian Gulf with the Gulf of Oman that handles over 20% of the world’s daily oil and gas shipments.3) Rupee weakensRupee fell 14 paise to 95.50 against the US dollar in early trade on Wednesday. Higher crude prices continue to raise concerns over India’s import bill and inflation outlook, keeping sentiment cautious in the forex market, said Jateen Trivedi, VP Research Analyst - Commodity and Currency, LKP Securities.“Going ahead, the market will closely track the RBI policy outcome...Rupee movement will continue to be influenced by the dollar index, crude oil prices, and capital flows. Technically, 94.85 remains an important resistance level, while 95.75 is the next key support zone,” he added.4) FII selling continuesForeign investors remained net sellers of Indian equities, net selling shares worth nearly Rs 8,363 crore on Dalal Street on Tuesday. This came after a massive Rs 22,102 crore selloff in just one session on May 29, and Rs 3,843 crore on June 1.5) Bond yields riseUS Treasury yields inched higher up amid the latest geopolitical developments. The yield on benchmark US 10-year notes rose to 4.457% while the 30-year bond yield ⁠rose to 4.97%. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose to 4.056%. Rising bond yields typically make bonds more attractive to investors, which in turn can lead to some downturn in markets.6) IT stocks tumbleThe market downtrend may have also been driven by heavy selling in IT stocks, which earlier saw a sharp surge over consecutive sessions despite overall market volatility. Nifty IT index jumped more than 4% on Tuesday to record its highest single day gain since May 2026. The index soared nearly 8% in just three sessions, while Nifty 50 declined 2% during the period. The sharp surge may have led to some profit booking today in heavyweight IT stocks, which in turn weighed on overall market sentiment.(With inputs from agencies)(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)