Govt to meet stakeholders to assess impact of Iran-Israel conflict on India’s trade

New Delhi: The commerce ministry on Friday will meet stakeholders, including shipping lines, exporters, container firms, and other departments, to assess the impact of the Iran-Israel conflict on India’s overseas trade and address related issues, an official said.

The industry official said that the meeting will be chaired by Commerce Secretary Sunil Barthwal.

"The meeting is today. We will raise issues related to freight rates," the official said.

Barthwal has earlier stated that India is keeping a close watch on 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.

Meanwhile, Israel's June 14-15 strike on Houthi military leadership in Yemen has also heightened tensions in the Red Sea region, where Houthi forces have already attacked commercial shipping.

For India, this poses another serious risk. Nearly 30 per cent of India's west-bound exports to Europe, North Africa, and the US East Coast travel through the Bab el-Mandeb Strait, now vulnerable to further disruption, the GTRI has said.

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. After the US intervened with attacks on the rebels, the firing on commercial ships stopped.

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 2024-25 from $4.5 billion in 2023-24. Imports from Israel came down to $1.6 billion in the last fiscal from $2.0 billion in 2023-24.

Similarly, exports to Iran, amounting to $1.4 billion, which were at the same level in 2024-25 as well as in 2023-24, 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.

Based on the tariff war impact, the World Trade Organisation (WTO) has already said that global trade will contract 0.2 per cent in 2025 as against the earlier projection of 2.7 per cent expansion.

India's overall exports had grown 6 per cent on year to $825 billion in 2024-25.