Iran-Israel war threatens India’s West Asia trade and energy security

Experts warn that rising tensions between Iran and Israel could severely impact India’s trade with West Asia, disrupt oil shipments via the Strait of Hormuz, and push up prices. Key exports like rice and bananas are particularly vulnerable to delays

New Delhi: The ongoing conflict between Iran and Israel—and the recent US strikes on Iranian sites—could have serious implications for India’s trade with West Asia, experts warned. They say further escalation may disrupt crucial trade routes, inflate shipping costs, and push up oil prices, impacting inflation and energy security.

India’s exports to Iran and Israel have already started feeling the pinch. “We are in for big trouble now,” said Sharad Kumar Saraf, founder chairman of Technocraft Industries India. “This war will have a cascading effect on India’s trade with countries like Iraq, Jordan, Lebanon, Syria, and Yemen.”

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Saraf revealed that his company, which exports industrial components, is currently holding back consignments to Iran and Israel. He added that disruptions in shipping routes—especially the Strait of Hormuz—will affect the movement of oil tankers and push up crude oil prices, “the mother of all prices.”

The Strait of Hormuz, a narrow waterway through which 60–65 per cent of India’s crude imports pass, is under threat amid escalating tensions. Any military escalation or blockade in this corridor would directly impact India’s energy supplies, warned the Global Trade Research Initiative (GTRI), a Delhi-based think tank.

GTRI also highlighted that India’s trade with a broader West Asian region —worth USD 8.6 billion in exports and USD 33.1 billion in imports—is at risk. “Any disruption to shipping lanes, port access, or payment systems would increase costs, delay shipments, and raise supply chain risks,” said GTRI Founder Ajay Srivastava.

India’s exports to Iran in FY25 stood at USD 1.24 billion, with key items like Basmati rice, bananas, tea, and Bengal gram. Imports were valued at USD 441.8 million. With Israel, exports were USD 2.1 billion, and imports stood at USD 1.6 billion.

Payment systems are already under stress due to US sanctions on Iran, and any further conflict could strain trade even more. “Perishable goods like bananas and tea are especially vulnerable to delays,” Srivastava warned.

Experts also cited disruptions in the Red Sea, where Houthi rebel attacks have halted cargo movements. The Bab-el-Mandeb Strait, another vital route for Indian-European trade, is also affected. About 80 per cent of India’s trade with Europe and much with the US transits through the Red Sea, both accounting for 34 per cent of Indian exports.

The global implications are equally dire. The World Trade Organisation (WTO) has revised its 2025 global trade forecast from 2.7 per cent growth to a 0.2 per cent contraction due to these ongoing geopolitical risks.

India’s overall exports in FY25 grew 6 per cent to USD 825 billion, with hopes of crossing $900 billion this fiscal. However, May exports dropped by 2.17 per cent year-on-year to USD 38.73 billion, mainly due to a decline in petroleum product shipments.

With tensions rising across multiple maritime corridors, the road ahead for India’s trade—especially with energy-rich West Asia—appears increasingly uncertain.