India on high alert, as the Mideast conflict threatens energy, spikes freight costs, and delays the crucial Chabahar Port project.
India is closely monitoring the rapidly escalating conflict between Israel and Iran, preparing contingency plans amidst growing concerns over its potential ramifications on the nation’s economy, energy security, and regional connectivity. Government officials are holding daily meetings, particularly to address a potential closure of the strategically vital Strait of Hormuz.
The Strait of Hormuz is a critical artery for India’s energy needs, with approximately 40% of its crude oil imports and 54% of its liquefied natural gas (LNG) supplies transiting through the waterway. While the government currently maintains that there is no immediate negative impact on oil prices or supplies and asserts that India’s reserves are sufficient, the situation remains highly fluid.
Rising Costs and Trade Disruptions
Indian exporters are already feeling the strain from heightened tensions. Air freight rates have surged by 10-15% lately, due to airspace closures over Pakistan, Iran, and Israel. Shipping costs are also anticipated to rise, with companies bracing for war surcharges, higher insurance premiums, and increased fuel costs.
Furthermore, Indian exporters anticipate reduced demand from Iran, a significant market for commodities such as basmati rice, soybeans, and tea. Discussions between the government and exporters are underway to assess the situation and devise strategies to mitigate these adverse effects.
Chabahar Port Project Faces Setback
One of the most significant repercussions is the disruption to the development and operations of the Chabahar Port in Iran. This critical hub is a cornerstone of India’s regional connectivity strategy, providing a vital link to Afghanistan, Central Asia, and the Middle East, bypassing Pakistan. Sources indicate that the ongoing conflict has severely disrupted progress on the port’s expansion and the associated railway line project, which could significantly delay India’s broader ambitions of enhancing trade and influence in the region.
Humanitarian Concerns for Indian Nationals
India also maintains strong people-to-people ties with Iran, where an estimated 10,000 Indians reside, including around 4,000 students. The government has been actively evacuating its nationals to safer locations, with many students already brought back home. Ongoing hostilities have led to the postponement of examinations and heightened concerns for the welfare of Indian citizens in the region.
The Israel-Iran conflict is impacting India on multiple fronts—from its energy security and trade disruptions to strategic infrastructure projects and humanitarian challenges. While the government expresses optimism about managing short-term risks, the evolving situation necessitates sustained vigilance and adaptive strategies in the weeks ahead.
Source: CNBC
