Gautam Adani's Middle East gamble: Billions at risk as Iran-Israel war escalates

Economic Times

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The Adani Group's sprawling investments across Israel, from the strategic Haifa Port to high-stakes defence ventures, are coming under sharp scrutiny as escalating hostilities between Israel and Iran cast a shadow over regional stability and investor sentiment.The latest Israeli strikes on Iranian nuclear and military sites, widely seen as the opening phase of a prolonged confrontation, have raised immediate concerns about the operational and strategic implications for Gautam Adani's billion-dollar bets in the Middle East.On Friday, shares of Adani Ports and Special Economic Zone fell as much as 3.2% to Rs 1398, while Adani Enterprises declined 2.8% to Rs 2469.55 on the BSE.At the centre of Adani's presence in Israel is Haifa Port, where Adani Ports holds a 70% stake acquired in 2023 for $1.2 billion in partnership with Israel's Gadot Group. Strategically located in northern Israel, the port contributes around 3% to Adani Ports' annual cargo volume and is critical for Israeli imports and exports.In the immediate term, Adani's Haifa Port is likely to face risks such as cargo delays and shipping reroutes due to the escalating regional instability. While its northern location offers some protection from the conflict-heavy southern zones of Israel, prolonged fighting could disrupt wider Mediterranean trade routes, potentially affecting operations and logistics.During past regional escalations, Adani Ports shares had slipped as dry bulk vessels encountered bottlenecks. Market participants note that while the financial exposure may be limited, the symbolic and strategic weight of the asset makes it vulnerable to sustained geopolitical tensions Adani's Israel ties also extend into defence manufacturing. In 2018, Adani Enterprises partnered with Israeli defence major Elbit Systems to launch Adani Elbit Advanced Systems India. Based in Hyderabad, the joint venture manufactures Hermes 900 drones, the same unmanned aerial vehicles used by the Israel Defense Forces (IDF).The Hyderabad facility is currently the only site outside Israel producing the Hermes 900 drone, a key asset for the Israel Defense Forces. Elbit Systems, which supplies 85% of the IDF's drones, may see demand increase as the conflict escalates.While the Adani-Elbit joint venture could benefit from heightened military procurement, the situation also brings into focus the broader economic and political complexities surrounding such defence collaborations in a volatile geopolitical environment.The Adani Group had also been in talks with Israel's Tower Semiconductor for a proposed $10 billion commercial semiconductor manufacturing joint venture. However, according to a Reuters report in April, the project has been put on hold, possibly due to both market and geopolitical uncertainties.While Haifa Port accounts for only about 3% of Adani Ports' overall cargo volume, its strategic significance far outweighs its contribution to throughput. The limited direct financial exposure may shield the company in the short term, but the port's symbolic value, and its location in a region now gripped by rising instability, could weigh on investor sentiment and operational continuity in the coming quarters.Israel declared a state of emergency in anticipation of Iranian retaliation via missiles or drones. An Israeli defence official said several senior Iranian officials and nuclear scientists were also likely killed.The market reaction was immediate. Brent crude surged nearly 9% to $75.36 per barrel, while gold rose 1.5% to $3,434 per ounce. Asian equities dropped sharply amid a wider flight to safe-haven assets like the Swiss franc.U.S. Secretary of State Marco Rubio said the United States was not involved, calling the Israeli action a 'unilateral strike.' Meanwhile, a planned sixth round of U.S.-Iran nuclear talks in Oman hangs in limbo.As conflict reshapes the Middle East's economic and political terrain, the Adani Group's Israel portfolio, spanning ports, semiconductors, and military technology, now finds itself at the intersection of business ambition and battlefield uncertainty.Also read | Oil jumps more than 12% as Israel strikes Iran, rattling investors (Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)