The worst fears of the global trading community have materialised. After days of rising tension, Israel, assisted by the United States, launched what it termed a pre-emptive strike on Iran, setting off a cycle of missile exchanges.
With Iranian state media confirming the death of Supreme Leader Ayatollah Ali Khamenei in the ongoing attacks, expectations are that the Islamic Revolutionary Guard Corps (IRGC) may adopt a more aggressive posture towards the US and Israel and could launch another set of ballistic missiles across multiple locations in the region, potentially disrupting global trade flows.
For India, the stakes are significant, as the Middle East is not a peripheral market for its exporters. It is a central trade artery, both a destination and a transshipment hub for Europe and Africa. As the conflict intensifies, exporters with exposure to West Asia say they are bracing for higher freight rates, longer transit times, and mounting uncertainty.
Freight pressure builds
Traders say that with Iran intensifying rocket fire and the conflict widening, disruptions across key Gulf trade hubs could deepen in the coming days. Any extended shutdown of Dubai International Airport, one of the world’s busiest transit hubs, along with potential restrictions at other UAE airports, would signal the scale of the fallout for regional trade flows.
Anant Srivastava, President of the Home Textile Welfare Association (HEWA), said the conflict has come at a particularly sensitive time for exporters. “The festive and peak summer sales season is underway, and textile and home textile exporters are executing large volumes of shipments. The sector has already been under stress due to tariff uncertainty, the Russia–Ukraine conflict, and global demand slowdown. This fresh escalation could intensify the pressure,” he said.
He warned that any disturbance around the Strait of Hormuz, along with disruption at key regional ports such as Jebel Ali and Ashdod, could affect trade flows. “Even a two-week extension in transit time could push freight costs up by 25–30 per cent. Longer voyages will strain working capital cycles and may lead to bulk order cancellations,” Srivastava said, adding that exporters risk missing the crucial European summer retail window, while Middle East buyers may defer imports planned around Ramadan and Eid if uncertainty persists.
“With Dubai functioning as a major redistribution hub for MENA, Africa and Gulf markets, any sustained disruption there could trigger order deferments and payment delays across the supply chain. Shipment costs, previously in the range of $250–300, have already moved to $350–400 due to heightened demand during Ramadan. If tensions escalate further, freight could rise to $1,100–1,200,” Srivastava added, noting that buyers in affected markets may prioritise essential goods such as agricultural products over non-essential categories like textiles.
He added that exporters should exercise caution before dispatching shipments. “It is advisable to reconfirm orders with buyers and ensure adequate ECGC and marine insurance cover before shipping, as port disruptions could result in post-shipment cancellations and delayed payments.”
He cautioned that GCC and Israel-bound shipments may face erratic port scheduling if the conflict persists, with shipping lines struggling to provide firm arrival timelines. “Freight costs may move up, and standard marine or cargo insurance is unlikely to cover damage or losses directly arising from war-related perils, because war risks are typically excluded from basic policies unless separate cover is purchased,” he said.
Exporters also highlight that a significant portion of India’s exports move through Dubai’s free zones, which function as warehousing and redistribution hubs for the Middle East and Africa. If disruptions continue, traders serving Gulf markets are likely to feel the impact.
According to S C Ralhan, President of the Federation of Indian Export Organisations (FIEO), the conflict has already begun to disrupt established global logistics channels. “Air routes are being altered, and maritime trade through the Red Sea and key Gulf straits faces heightened uncertainty. If diversions become prolonged, shipments may increasingly reroute via the Cape of Good Hope, adding an estimated 15–20 days to transit time for Europe and the United States,” said Ralhan.
This will inevitably raise freight costs and stretch supply chains. Ralhan added that heightened geopolitical risk typically results in higher marine insurance premiums, further increasing transaction costs for exporters. “A prolonged disruption could also exert upward pressure on global energy prices, with consequential implications for input costs and currency stability, including pressure on the rupee,” he observed. The FIEO chief added that while Indian exporters have demonstrated resilience in navigating past disruptions, sustained instability in these critical trade corridors necessitates close monitoring and calibrated policy support to maintain competitiveness.
Hormuz in focus
The biggest concern for India remains the Strait of Hormuz, a critical global energy chokepoint through which nearly 20 million barrels of oil pass daily. Around 60–65 per cent of India’s crude imports transit through this route.
Iran’s Islamic Revolutionary Guard Corps (IRGC) Navy has declared the Strait of Hormuz closed to vessel traffic, stating that navigation is forbidden until further notice.
Any sustained disruption could push up crude and LNG prices, widen India’s import bill and stoke inflationary pressures across refining, chemicals, fertilisers, aviation and transport. While only a small share of global container volumes moves directly through Hormuz, industry observers say the energy impact would far outweigh container trade exposure.
Faisal Ahmed, Professor of International Business and Geopolitics at the FORE School of Management, described the situation as “geopolitically volatile” with significant geo-economic consequences. “More than half of India’s oil imports pass through Hormuz. Energy costs and associated value chains will be heavily affected. The spillover extends beyond Iran and Israel to countries such as the UAE, with which India has a comprehensive trade agreement. A lot of goods have to be rerouted, but the fact remains the Bab-el-Mandab is also facing continued risk, due to which transportation costs could rise substantially,” he said.
Nisha Taneja, Professor at the Indian Council for Research on International Economic Relations (ICRIER), said the closure would also disrupt India’s broader trade connectivity architecture. “The International North–South Transport Corridor through Iran reduces transit time to Russia to about 20 days, compared with nearly 40 days via the Suez Canal. If shipments are forced to reroute, freight costs will rise sharply, weakening India’s trade access to Central Asia and Russia,” she said.
Deep trade exposure
India’s strategic trade ties with the GCC, Iran, and Israel remain significant, with FY25 data underscoring strong energy and export linkages despite global headwinds.
India–GCC bilateral trade stood at $178.56 billion in FY25 (exports: $56.87 billion; imports: $121.68 billion), accounting for 15.4 per cent of India’s total global trade of about $1.16 trillion. The UAE is India’s largest GCC trading partner, followed by Saudi Arabia, with trade driven by energy imports, gems and jewellery, machinery, electronics, and food products. The region also remains a key source of foreign direct investment, with cumulative inflows exceeding $28 billion by late 2024.
Bilateral trade with Iran totalled about $1.68 billion in FY25, with India’s exports at $1.24 billion and imports at $0.44 billion. While sanctions continue to constrain imports, Iran remains important for agricultural exports and connectivity through the Chabahar Port.
India–Israel merchandise trade reached approximately $3.62–3.75 billion in FY25 (excluding defence). India is Israel’s second-largest trading partner in Asia and seventh globally. Furthermore, FTA discussions are progressing, focusing on expanding cooperation in technology and innovation sectors.
Sectoral bodies warn of prolonged strain
Among the sectors likely to feel the impact in the coming days is India’s livestock industry, which has significant export exposure to the MENA region.
Divya Kumar Gulati, Chairman of the Compound Livestock Feed Manufacturers Association (CLFMA), said the conflict is expected to raise costs and slow exports in the livestock sector.
Notably, India’s buffalo meat exports, which account for over 80 per cent of its animal product shipments, are heavily skewed towards the Gulf and broader MENA region, with the UAE and Saudi Arabia among the largest importers of Indian halal boneless buffalo meat. India’s livestock exports to the MENA region are estimated at $2.3–$2.5 billion in FY25, supported by record global buffalo meat sales of about $4.06 billion.
Gulati added that India’s shrimp farming sector is also heavily export-dependent, with key markets including the US, China, the EU, and the Middle East. Any escalation in the region could push up shipping costs, affecting exports to markets such as the UAE and Oman if disruptions intensify. According to Gulati, the conflict has introduced fresh volatility for livestock traders. “While direct trade in meat is often secondary to energy concerns, the ripple effect through the supply chain, particularly feed, fertilizer and logistics, is where the primary impact is likely to be felt,” he said.
Gulati emphasised that the livestock sector is highly sensitive to grain and fertilizer prices, both of which could see wartime premiums if tensions persist. He noted that Iran is a major global exporter of urea, shipping roughly 4.5 million tonnes annually, and even without physical damage to production facilities, market nervousness could push prices up by $50–$60 per tonne, raising input costs for farmers cultivating feed crops such as silage and hay.
He further cautioned that traders moving livestock or chilled meat through Middle Eastern routes may face logistical bottlenecks, with shipments potentially being rerouted around the Cape of Good Hope, similar to earlier Red Sea disruptions, adding 15–20 days to transit times. For live animal exports, longer voyages could increase feed requirements and heighten stress-related risks. Gulati also pointed out that the impact may not be limited to India, citing reports from East African countries such as Kenya, where feed prices have surged due to shortages of imported inputs like soybean meal and maize. “The immediate risk for traders is not demand destruction but a margin squeeze,” Gulati said, referring to higher fuel, fertiliser, and insurance costs that could weigh on profitability if tensions persist.
Satish Wagh, chairman of the industry body Chemexcil, representing the country’s chemical exporters, said the sector’s wide geographic exposure makes it particularly sensitive to any prolonged disruption in West Asia. India exported $28.63 billion worth of inorganic and organic chemicals in FY25, Wagh said. Of this, Europe accounted for $7.02 billion, NAFTA $4.84 billion and the Middle East $3.92 billion, followed by North East Asia at $3.54 billion and ASEAN at $3.06 billion, with the remainder distributed across Latin America, South Asia, Africa, CIS and Oceania.
“Given the scale and spread of our exports, disruptions in shipping routes or air cargo corridors could delay deliveries across multiple markets. If airports in key Arab nations face restrictions and vessel availability tightens, freight rates will rise and supply chains will come under strain,” he said. He underlined that the chemical industry is closely linked to crude oil derivatives. “Many feedstocks in petrochemicals, polymers, and specialty chemicals are directly linked to oil and gas prices. If crude spikes due to tensions in the region, input costs will rise immediately, compressing margins unless prices are passed on.” Wagh added that with the sector already navigating evolving US trade dynamics, sustained geopolitical instability could further complicate export competitiveness and working capital cycles.
Pankaj Chadha, President of EEPC India, the apex body for engineering exporters, said the duration of the conflict will determine the scale of impact on the sector.
“If this remains a short-lived episode, the disruption may be manageable. But if the conflict stretches for weeks, it could deliver a significant jolt across multiple segments,” Chadha said.
Notably, India’s engineering exports to the UAE reached approximately $8.28 billion in FY25, accounting for nearly 7 per cent of the country’s total engineering exports of $116.67 billion. The Gulf region also serves as a transshipment and project execution hub for Indian engineering goods. “Over 60 per cent of our members are MSMEs. They typically operate on tighter margins and may not be able to withstand a prolonged working capital squeeze caused by delayed shipments, higher freight costs, and rising input prices,” Chadha said, warning that extended instability could slow fresh order execution.
