Exporters have raised strong concerns that the conflict could disrupt shipping through the Strait of Hormuz. (Amnesty International image)
What is the impact of ongoing tensions in the Middle East on India’s trade, exports and supplies of crude oil and LPG? Rising geopolitical tensions in the Middle East in the wake of military strikes by the US and Israel on Iran could disrupt global trade, increase shipping and insurance duties, delay the movement of goods and trigger a rise in international crude oil prices, which in turn could inflate India’s import bill, according to experts.The Commerce Ministry has scheduled a meeting on Monday with exporters, shipping companies, freight forwarders and representatives of various ministries to assess the extent to which rising tensions in the Middle East are impacting Indian trade flows.
Major escalation in the Middle East: An oil ship was bombed off the coast of Oman after Iran closed the Strait of Hormuz | He watches
Exporters have raised strong concerns that the conflict could disrupt shipping through the Strait of Hormuz and Bab al-Mandab Strait, both crucial sea lanes.
These routes serve as important links linking India to the Gulf region as well as to major markets in North America and Europe.The Strait of Hormuz is a narrow channel, 33 kilometers wide, that connects the Persian Gulf to the Arabian Sea. While the focus is on oil, in terms of disrupting shipments through the Strait of Hormuz, it is important to understand that the corridor is also important for other trade as well.
According to Ajay Srivastava, founder of the Global Trade Research Initiative (GTRI), the direct impact on India is economic and strategic.
He adds: “The turmoil in the Strait of Hormuz threatens a significant share of its imports of crude oil and liquefied natural gas, increasing shipping costs, insurance premiums and fuel prices, while higher global oil prices could lead to a widening of the current account deficit and fuel inflation.”Reports indicate that Iran has halted maritime traffic through the Strait of Hormuz, a critical route through which a significant share of India’s crude oil and liquefied natural gas (LNG) supplies are transported from Iraq, Saudi Arabia, the UAE and Qatar.
It is estimated that about 35-50% of India’s crude oil imports, along with a large volume of liquefied natural gas (LNG) shipments, pass through this strategic corridor.
Risks of high oil prices and vulnerability to liquefied petroleum gas:
GTRI notes that in response to the closure of the Strait of Hormuz, refineries may reroute cargo via pipelines to Red Sea ports. India may get more oil from Russia, the United States, West Africa and Latin America. Finally, there is the option of relying on strategic oil reserves to cushion short-term shocks.
However, as GTRI points out: These alternatives increase costs and transit times. “The impact will be global, not just Indian. Nearly a fifth of the world’s oil and a significant share of LNG trade flows through the strait, with most of the shipments destined for Asian economies including China, Japan and South Korea,” GTRI says.According to GTRI, global crude oil prices are expected to rise sharply, as markets price in the risk of supply disruptions.
The price of Brent crude has already risen to around $70-73 per barrel amid escalating tensions, and limited conflict could add $5-20 per barrel, while disruption to Iranian exports or tanker traffic could push prices above $90 per barrel, the think tank predicts.Sumit Ritolia, senior research analyst for refining and modeling at Kpler, believes that while India may be able to handle higher oil prices and disruption to crude oil supplies in the short term, LPG supplies are at greater risk of weakening.“Escalating tensions in the Middle East once again highlight a structural reality: India remains physically exposed to the Strait of Hormuz – not just for crude oil, but even more so for LPG and LNG,” says Sumit Retulia.
Nearly 2.5-2.7 million barrels per day of India’s crude oil imports pass through the Strait of Hormuz, with major supplies coming from Iraq, Saudi Arabia, the UAE and Kuwait. Over the past few months, the share of Middle Eastern crude in India’s import mix has increased as refineries reduce part of their consumption of Russian oil.
This shift has increased the relative importance of Gulf supplies, making India more sensitive in the near term to any interruption in the Hormuz transit.Shipping data from Kpler indicates that cargoes of Russian crude remain available in waters around the Indian Ocean and Arabian Sea, including supplies in floating storage. Retolia says that if flows from the Middle East decrease, Indian refiners are likely to increase their purchases of Russian crude within a short period.Although India sources crude oil from multiple regions, Gulf supplies still have a logistical advantage, with shipping times typically ranging from five to seven days compared to about 25 to 45 days for shipments coming from the Atlantic Basin.
More importantly, India imports approximately 80-85% of its LPG needs, with most of these supplies coming from Gulf producers and moving almost entirely through the Strait of Hormuz. In contrast to crude oil, India does not maintain strategic reserves of LPG on a similar scale, making supply chains for this fuel more vulnerable to logistical disruptions.
Risks to trade and exports
As the institute points out, India’s trade with Iran remains modest due to long-standing US sanctions that restrict banking channels, shipping and energy transactions. “In 2025, India exported goods worth about $1.2 billion to Iran, dominated by agricultural products – rice alone accounts for nearly $747 million, followed by bananas ($61 million) and tea ($51 million).
On the import side, India purchased goods worth about $408.6 million from Iran, including coke ($135.7 million), apples ($71.5 million), and dates ($33.3 million). “India’s trade with Iran is limited but further instability could disrupt these flows.”However, the trade and r Rat to other parts of the region, and crossing through the Strait of Hormuz, faces risks.The Commerce Ministry has arranged discussions to review how the rapidly changing situation will impact India’s foreign trade.Federation of Indian Export Organizations president SC Ralhan said the hostilities have already started affecting existing global logistics networks. He pointed out that airlines are adjusting their flight routes, while maritime trade through the Red Sea and vital Gulf lanes faces a state of increasing uncertainty.If diversions continue, goods bound for Europe and the United States may have to be routed around the Cape of Good Hope, extending transit times by an estimated 15 to 20 days.
Such disruptions are expected to lead to higher shipping fees and insurance costs for exporters.Industry representatives said it could take several days before there is clarity on shipping capacity, revised routes, insurance cover and shipping rates.
The Indian Rice Exporters Association on Sunday urged its members to refrain from incurring new costs, insurance and freight liabilities for shipments to Iran and other Gulf markets, warning that the situation may disrupt logistics services and increase transportation and insurance expenses.The organization warned that developments in Iran and the United Arab Emirates could quickly affect bunker fuel prices and affect the availability of container ships and bulk carriers. It warned that freight charges for containers and bulk cargo could rise sharply in a short time, leaving exporters vulnerable to losses on contracts with fixed delivery rates.The association noted that five major destinations for basmati rice – Saudi Arabia, Iran, Iraq, UAE and Yemen – are located in West Asia and together account for nearly half of India’s basmati exports.The West Asia region hosts major sea lanes through which a significant portion of India’s exports are transported to major destinations such as the United States and Europe. Together, these markets represent approximately 56% of the country’s merchandise exports.Trade analyst Biswajit Dhar said the conflict has already affected shipping operations and could create difficulties for Indian exporters.“Oil prices may rise to $120-130 per barrel, which would increase our import bill and could harm inflation.” Trade analyst Biswajit Dhar told PTI, adding that the protracted crisis could also impact remittance flows.He also noted that negotiations on a free trade agreement with the Gulf Cooperation Council may slow down if instability continues. India recently began discussions on a trade agreement with the Gulf Cooperation Council countries, which includes Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman and Bahrain.About 10 million Indians currently live and work in the GCC countries.The India-UAE FTA came into effect in May 2022, and it recently concluded a comprehensive economic partnership agreement with Oman.The Bab el-Mandeb Strait is an essential maritime link connecting the Red Sea and the Mediterranean region to the Indian Ocean. Ships departing from Indian ports usually travel west through the Arabian Sea, pass through the Red Sea, pass through the Suez Canal and then continue on to the Mediterranean Sea before reaching their European destination. Extras.The alternative route via the Cape of Good Hope is longer and slower, but reduces exposure to disturbances in the Suez Canal area. It is generally preferred for transporting bulk cargo or during periods of political instability in the Middle East.