India’s commerce ministry has called for urgent consultations with shipping lines, exporters, and container companies to evaluate the impact of escalating tensions between Iran and Israel on the nation’s overseas trade. The conflict threatens critical shipping lanes such as the Strait of Hormuz and the Red Sea, both lifelines for India’s energy imports and merchandise exports. Rising freight costs, shipping risks, and potential inflationary pressures loom large. With over 80% of India’s energy needs dependent on imports and substantial trade routed through these vulnerable straits, policymakers and businesses are on high alert, seeking strategies to safeguard India’s economic interests.
Government and Industry Join Forces to Address Emerging Risks
The commerce ministry, under the leadership of Commerce Secretary Sunil Barthwal, convened a high-stakes meeting on Friday with key stakeholders to assess the fallout from the Iran-Israel conflict on India’s trade corridors. Attendees included representatives from shipping companies, exporters’ associations, container operators, and allied government departments.
Participants flagged concerns over surging freight rates and growing uncertainties linked to the security of vital maritime routes. The ministry reiterated its commitment to closely monitor the evolving geopolitical situation and work collaboratively with industry players to mitigate potential disruptions.
Strategic Importance of Strait of Hormuz and Red Sea
India’s economic stability is intrinsically tied to the uninterrupted flow of goods through the Strait of Hormuz and the Red Sea. The narrow Strait of Hormuz, merely 21 miles wide at its tightest point, facilitates the passage of nearly a fifth of the world’s oil trade. For India, this channel handles about two-thirds of its crude oil imports and half of its liquefied natural gas shipments — critical to sustaining domestic energy requirements, over 80% of which are met through imports.
Meanwhile, the Bab el-Mandeb Strait and the Red Sea are equally vital, with close to 80% of India’s merchandise trade with Europe and a significant portion of US-bound shipments relying on this route. The Global Trade Research Initiative (GTRI) has warned that any disruption here could have far-reaching consequences for trade flows and supply chains.
Conflict’s Growing Shadow on Trade and Economy
The current conflict has already begun to impact India’s trade metrics. Exports to Israel dropped sharply to USD 2.1 billion in 2024-25, down from USD 4.5 billion a year earlier. Similarly, imports from Israel fell to USD 1.6 billion from USD 2 billion. Trade with Iran remains subdued, with exports steady at USD 1.4 billion but imports declining to USD 441 million from USD 625 million.
Beyond bilateral trade, the broader impact on freight rates, insurance premiums, and shipping availability could fuel inflationary pressures, weaken the rupee, and complicate fiscal management. Analysts point to the compounded challenges already facing global trade, including the lingering effects of high tariffs and supply chain disruptions.
Global and Domestic Outlook
The World Trade Organization has revised its global trade forecast, now expecting a contraction of 0.2% in 2025, a stark reversal from its earlier projection of 2.7% growth. For India, which recorded a commendable 6% growth in overall exports to USD 825 billion in 2024-25, the task ahead will be to sustain this momentum in the face of mounting external risks.
The government’s proactive engagement with industry stakeholders signals its intent to navigate these challenges with agility. However, sustained policy support, diplomatic efforts to de-escalate tensions, and strategic diversification of trade routes will be crucial in shielding India’s economy from further shocks.
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