Iran-Israel war escalation: Experts warn of cascading impact on India's trade with West Asia; crude prices, exports at risk

Time of India

9 hours ago

The escalating war between Iran and Israel could have wide-ranging repercussions for India's trade with the broader West Asian region, experts warned, citing early signs of export disruptions and heightened shipping and insurance risks.
The conflict has already started impacting India's trade with Iran and Israel, and any further escalation could endanger exports to countries such as Iraq, Jordan, Lebanon, Syria and Yemen, they said.
'We are in for big trouble now because of this war. It will have a cascading effect on India's trade with West Asian countries,' said Sharad Kumar Saraf, founder chairman of Mumbai-based Technocraft Industries, which exports drum closures and packaging components, PTI quoted.
Saraf said his firm is already holding back shipments to both Israel and Iran due to the deteriorating situation.
Strategic choke points under stress
The recent US airstrikes on Iran — aimed at neutralising its nuclear programme — have worsened the security outlook, particularly around the Strait of Hormuz, a narrow but critical oil shipping lane through which 60–65 per cent of India's crude imports pass.
The Global Trade Research Initiative (GTRI) noted that any escalation in the region, especially one that disrupts the Hormuz Strait, would severely affect India's energy security, increase shipping costs and drive up inflation.
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'Any disruption to shipping lanes, port access or financial systems in this corridor would severely impact India's trade flows,' said Ajay Srivastava, GTRI founder.
India's exposure to Iran, Israel, and West Asia
India exported goods worth $1.24 billion to Iran in FY25, primarily Basmati rice ($753.2 million), banana, soya meal, Bengal gram, and tea. Imports from Iran were $441.8 million.
Trade with Israel was larger, with $2.1 billion in exports and $1.6 billion in imports during 2024–25.
GTRI warned that perishable shipments like rice, bananas, and tea are especially vulnerable due to delays and higher insurance costs. 'A prolonged conflict could dampen Iranian demand and squeeze Indian exporters,' Srivastava said.
Trade with the broader West Asia region — including Iraq, Jordan, Lebanon, Syria and Yemen — stood at $8.6 billion in exports and $33.1 billion in imports, making it a significant trading corridor.
Rising global shipping and security risks
The fresh conflict builds on already strained global shipping routes. Attacks by Yemen-based Houthi rebels since the October 2023 Israel-Hamas war have hampered commercial movement through the Red Sea. Around 80 per cent of India's European trade passes through this route, as does a large portion of shipments to the US.
The Red Sea also handles 30 per cent of global container traffic and 12 per cent of total world trade, making these disruptions especially significant.
India's overall exports had grown 6 per cent to $825 billion in FY25, and the government is targeting $900 billion this fiscal. However, May data showed a 2.17 per cent decline in exports, driven by a drop in petroleum product shipments.
The World Trade Organisation (WTO) has also revised its outlook, saying global trade will contract 0.2 per cent in 2025, against the earlier projection of 2.7 per cent growth, due to the tariff war and geopolitical instability.
Experts now warn that the widening Iran-Israel war, combined with the uncertain impact of US involvement and potential disruptions in the Hormuz Strait, may further derail India's trade recovery and energy security.
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