NEW DELHI: Monday’s mayhem on the Dalal Street eroded Rs 3,00,000 crore worth of investor wealth by midday after US President Donald Trump threatened to slap sanctions on Iraq “like they’ve never seen before.”At 2.30 pm, the market capitalisation of BSE-listed stocks stood at Rs 154 lakh crore, down nearly Rs 3 lakh crore from Friday’s close of Rs 157 lakh crore. Four of every five stocks traded in the red, with 229 stocks, mostly smallcaps, hitting lower circuit limits.West Asia accounts for nearly half of the world's oil production and Iraq is the second largest producer within the OPEC bloc. The killing of Iranian general Major Qassim Soleimani by the US forces has resulted in retaliation by Iran, including an attack on an airbase in Balad that houses US troops.“There is a concern that we will lose 20 per cent of sea-borne crude oil, which may lead to a 20 per cent increase in crude oil price. Let us hope not. But if things escalate towards that, then the prices could quite easily rabbit on to $75 or even higher. That is the concern we all hold, because of where the global economies are at the moment. I do not think they are fit enough to be able to absorb significant oil price increases,” said Jonathan Barratt, CIO, Probis Securities.To avoid getting caught in the US-Iran feud, the Iraqi Parliament passed a resolution seeking expulsion of US troops from the country, but President Trump insisted that the US would not leave the country without being paid for its military investments over the years.At 2.30 pm, BSE Sensex was down over 800 points, while Nifty was below the 12,000 level.US’ warning to Iraq of economic penalties is seen to be fuelling the rise in Brent crude prices beyond $75 a barrel level, which for a country like India (that runs a current account deficit), is worrisome.There are reports that the Indian government was looking to take expenditure cuts, if it were to come close to meet the fiscal deficit target for FY20 amid poor divestment proceeds.Media reports suggested that the quantum of expenditure cuts could be as high as Rs 2 lakh crore. For an economy that saw its lowest growth in 26 quarters at 4.5 per cent in September quarter, it is troubling.Emkay Global noted that the slippage in fiscal deficit during April-November crossed the Budget estimate by 14.8 per cent. The level is at a record-high in comparison with corresponding levels in the prior years. Observing the current level, the probability of a fiscal slippage to 3.8-4 per cent levels is likely in FY20, it said.The rise in crude oil prices may spook domestic equities whose benchmarks Sensex and Nifty hit record highs of late amid the economic slowdown.“Over a longer period, markets do reflect the ground realities of the economy. One can see rational exuberance for a period, but not for very long period of time. Meanwhile, the government is now very seriously looking at the economy, it is reaching out to industry participants. If somebody would have asked me for a wish list, privatisation would surely be one of the top agenda. It is unfortunate that the tax cut has come a bit too late. Maybe in 12 to 18 months we will have a different picture,” Sridhar Sivaram, Enam Holdings, told ET NOW Financial stocks took a hard knock in Monday's trade. As many as 37 of 40 banking stocks fell up to 5 per cent.Oil marketing stocks fell over 5 per cent in Monday’s trade. HPCL declined 5.23 per cent to hit a low of Rs 250. BPCL fell 2.08 per cent to Rs 472.10. IOC also dropped 2 per cent to Rs 124.70.Aviation stock InterGlobe Aviation fell 3 per cent to hit a low of Rs 1,329.50. SpiceJet tanked 4.38 per cent to Rs 101.50, before recovering lost ground. Paint stocks Asian Paints and Berger Paints declined 2 per cent each.The sectors which have run up fast are the ones at risk, said Dharmesh Kant – Head – Retail Research, IndiaNivesh, who sees some weakness in financial stocks.How Iran reacts to the US move holds the key than what trump says at present, Sunil Jain, Head of Equity Research, Nirmal Bang Securities.“OMCs, aviation, paints and a lot of chemicals firms that use oil as derivatives may come under pressure. We have seen a big runup in select midcap stocks. If the problem sustains, then those stocks may correct a lot,” Jain said.