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Ceasefire in Words, Missiles in Air: Rising tensions between Israel and Iran threaten India's billion-dollar Middle East trade
Despite US President Donald Trump's announcement of a ceasefire deal between Israel and Iran, the two warring sides continue to trade deadly missiles targeting each other's cities. This has put the Indian trading community in a state of uncertainty regarding the fate of their shipments into the region, which is a market for the country. Traders say that with Iran now launching rockets—most recently the attack on the Al Udeid base in Qatar—the situation remains volatile and uncertain for them.
'Freight costs are going up—now by 20-25% for all major trading destinations. For the Gulf (Jebel Ali port of Dubai), a 40-ft container shipment, which was previously $50, now costs $550. And it's not just Dubai; this holds true for all neighbouring ports,' says Ghaziabad-based home textile exporter
Ananat Srivastava
, describing the acute toll on his Middle East-bound shipments in the wake of the widening Iran-Israel conflict.
Even before the US bombed key Iranian nuclear sites, Srivastava, who is also Director of the Home Textile Exporters Association, says Indian traders were already facing disruptions. 'Lots of apparel and home textile products go to Israel. Transit time has increased by 30%, and freight rates are up by 50%. Vessel planning for containers has gone haywire. When the vessel will arrive, nobody knows. This applies to all routes, including Europe and the US, and holds particularly true in the case of the Middle East. Whatever schedule I get from the forwarder or vessel, it's now showing a delay of 2-3 weeks.'
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According to Srivastava, Israel-bound shipments are facing highly erratic port scheduling. He notes that shipping lines are no longer able to provide reliable schedules. Another key point he highlights is that while freight costs have increased, insurance costs remain unchanged. The reason: war and war-related damages are not covered under any policy.
Rajat Mehra, Co-convenor of the CII UP MSME Panel and Director at Rajat Chemicals Industry, affirms the increase in costs, noting that in addition to sky-high freight charges, he is also witnessing significant delays. 'A consignment that the importer had assured would be shipped to us last week is now reportedly delayed by another week as of this morning,' he says.
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The escalation of the war is already impacting shipping freight rates and insurance coverage for shipments, according to Sumit Jain, Managing Director of New Delhi-based Kanin Originals, an MSME manufacturing cotton garments. As things escalate further, the burden of increased supply chain costs will have to be borne by traders and end consumers, he cautions.
'A lot of India's exports move via Dubai's free zones, which serve as warehousing hubs for the Middle East, Africa, and GCC (Gulf Cooperation Council) nations. Traders catering to Gulf-bound markets are bound to suffer a blow due to this disruption. Any potential closure of the Strait of Hormuz will also cripple energy supply lines, particularly oil, used by Indian firms,' Jain adds.
India's strategic trade ties with the region
India's bilateral trade with the Gulf Cooperation Council (GCC) countries, Iran, and Israel accounts for a significant share of its
global trade
. In FY 2024-25, India-GCC bilateral trade reached $178.56 billion, accounting for 15.4% of India's total global trade. The UAE is India's top GCC trading partner, followed by Saudi Arabia, with both countries contributing the bulk of this trade through energy imports, gems and jewellery, machinery, electronics, and food products. The GCC, as a bloc, is also a major source of foreign direct investment into India.
Trade with Iran, though diminished by sanctions, remains important. India was the third-largest importer of Iranian goods in 2023, with exports to Iran, mainly basmati rice, bananas, soya meal, Bengal gram, and tea, totalling $1.24 billion in FY 2025. Imports from Iran have sharply declined since 2019 due to US sanctions, but Iran remains a strategic partner, especially for agricultural exports and as a transit hub through the Chabahar Port.
With Israel, India's trade has grown steadily, reaching $6.53 billion in FY 2024 (excluding defence), with India exporting $4.53 billion worth of goods (including chemicals, machinery, and agricultural products) and importing $2 billion in high-tech, electronics, and defence-related items. India is now Israel's second-largest trading partner in Asia and seventh globally.
Shipping companies forecast cost increases
With Iran's parliament approving the closure of the Strait of Hormuz, a new worry point has emerged for the Indian trading community. This is one of the world's most critical maritime chokepoints for global trade, especially for energy supplies. Approximately 20 million barrels of oil—about 20% of global petroleum liquids consumption—pass through the Strait every day, making it the single most important route for seaborne oil exports.
About 60-65% of India's crude oil imports transit through Hormuz, making energy security the most vulnerable sector. Disruptions would drive up oil and LNG prices, increase shipping and insurance costs, and trigger inflation across the Indian economy. Sectors heavily reliant on Middle Eastern energy—refining, chemicals, fertilisers, and transport—would be directly hit. Additionally, agricultural exports to Iran (notably basmati rice, bananas, and tea) are already being affected, with large consignments stranded at ports due to payment and shipping disruptions. Overall, any escalation would cascade through India's trade with the entire West Asian region, impacting both energy and non-energy sectors.
Hector Patel, Chief Operating Officer–Sea, at Jeena and Company, is of the view that oil shipments may need to be re-routed, and international shipping lanes could be severely disrupted if tensions rise. 'While only 2-3% of global container volumes pass through the Strait of Hormuz waterway, a direct container market impact would primarily affect the Middle East. This will affect the redirection of transshipment volumes, particularly impacting Dubai's Port of Jebel Ali, the busiest hub in the Gulf. This could cause congestion in alternative South Asian ports and elevate freight rates.'
Jitendra Srivastava, CEO of Triton Logistics & Maritime, is of the view that the escalating Israel-Iran tensions are driving a sharp surge in marine insurance premiums and disrupting lifeline shipping routes, especially through the Strait of Hormuz. 'It can double insurance rates for a Rs 50 crore bulk cargo shipment from Rs 1.5 lakh to Rs 6.5 lakh when war risk cover is needed to transit through risk-prone zones such as the Red Sea. Regular marine premiums are 0.3% of cargo value, of which war risk is 0.1%. This rise in insurance costs, combined with greater security risk, is compelling freight rates to jump by 30–50% as shipping lines transfer costs to customers.'
According to Srivastava, countries such as India, with extensive trade links with West Asia, are facing higher logistics costs and supply chain disruption risks. 'Exporters are now using alternative, longer routes to avoid risk zones, adding once more to transit time and cost.'
Notably, ratings agency Crisil has cautioned that a prolonged or escalating conflict, especially if it disrupts energy supplies, could aggravate risks, raise inflation, and pressure margins in oil-dependent sectors. Energy-intensive sectors and those with exposure to global shipping and insurance costs should be monitored closely for any escalation or supply chain disruptions, it stated in its latest report.
