India reviews trade risks as West Asia conflict disrupts supply chains

India's Commerce Ministry will convene a meeting with exporters, shipping lines, freight forwarders, and senior officials to assess the impact of the escalating Iran–Israel conflict on the country's trade flows.

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The review comes as military action across West Asia intensifies, with retaliatory strikes reported near major Gulf commercial hubs. While airspace closures have already disrupted passenger aviation, attention is now turning to maritime corridors that underpin a significant share of India’s exports.

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Industry representatives have flagged vulnerabilities around the Strait of Hormuz and the Bab el-Mandeb, two critical chokepoints linking India’s trade to the Gulf, Europe, and North America. Any prolonged instability in these routes could alter global shipping patterns.

Export bodies said early signs of strain are emerging across logistics networks. Air cargo routes are being adjusted due to restricted airspace, while shipping companies are closely monitoring security conditions in the Red Sea and adjoining Gulf waters. If tensions escalate further, vessels may again be rerouted via the Cape of Good Hope, a diversion that can add 15–20 days to transit times for shipments bound for Europe and the United States.

Such detours typically push up freight rates and insurance premiums, while also stretching exporters’ working capital cycles. Industry executives said it may take several days for clarity to emerge on vessel availability, revised sailing schedules, and new freight benchmarks.

The exposure is significant. The United States, Europe, and West Asia together account for over half of India’s merchandise exports. Annual outbound shipments to the US exceed $85 billion, while exports to Europe are close to $100 billion. West Asia remains both a key destination market and a critical transit gateway.

The situation revives memories of the 2023–2025 Red Sea disruptions, when shipping lines avoided shorter routes and diverted around Africa, sharply increasing transit times and costs. However, trade observers caution that the current tensions appear wider in scope, raising the risk of broader supply chain volatility.

Adding to uncertainty, major shipping lines are scheduled to announce revised freight rates at the start of the month. Earlier this year, rates had been moderating amid softer global demand. Whether that trend reverses will largely depend on the duration and scale of instability in West Asia.