Govt meets stakeholders to assess impact of Iran-Israel conflict on trade

New Delhi: The Commerce Ministry on Friday held consultations with key stakeholders, including shipping lines, exporters, container firms, and other departments, to assess the impact of the Iran-Israel conflict on India’s overseas trade, an official said.

The meeting was chaired by Commerce Secretary Sunil Barthwal.

The participants informed that the situation in the Strait of Hormuz is currently stable and a ship reporting system is in place to monitor any incidents.

The freight and insurance rates are also being closely monitored, the official said.

The commerce secretary emphasised the need to assess the evolving situation and its impact on Indian trade, the official said.

He highlighted the importance of exploring all possible alternatives in response to the situation.

Exporters have stated that the war, if escalated further, would impact world trade and push both air and sea freight rates.

They have expressed apprehensions that the conflict may impact the movement of merchant ships from the Strait of Hormuz and the Red Sea.

Nearly two-thirds of India’s crude oil and half of its LNG imports pass through the Strait of Hormuz, which Iran has now threatened to close.

This narrow waterway, only 21 miles wide at its narrowest point, handles nearly a fifth of global oil trade and is indispensable to India, which depends on imports for over 80 per cent of its energy needs.

According to think tank GTRI, any closure or military disruption in the Strait of Hormuz would sharply increase oil prices, shipping costs, and insurance premiums, triggering inflation, pressuring the rupee, and complicating India’s fiscal management.

The present conflict that began with an attack on Israel on October 7, 2023 had brought cargo movement through Red Sea routes to a halt due to attacks by Houthi rebels on commercial shipping.

Last year, the situation around the Bab-el-Mandeb Strait, a crucial shipping route connecting the Red Sea and the Mediterranean Sea to the Indian Ocean, escalated due to attacks by Yemen-based Houthi militants.

Around 80 per cent of India’s merchandise trade with Europe passes through the Red Sea, and substantial trade with the US also takes this route. Both these geographies account for 34 per cent of the country’s total exports. The Red Sea Strait is vital for 30 per cent of global container traffic and 12 per cent of world trade.

India’s exports to Israel have fallen sharply to $2.1 billion in FY25 from $4.5 billion in FY24. Imports from Israel came down to $1.6 billion in the last fiscal from $2.0 billion in FY24. Similarly, exports to Iran, amounting to $1.4 billion, which were at the same level in FY25 as well as in FY24, could also suffer.

India’s imports from Iran were at $441 million in FY25 as against $625 million in the previous year. The conflict adds to the pressure that the world trade was under after the US President Donald Trump announced high tariffs.