Indian Exporters Sound Alarm Over Middle East Conflict Disrupting Global Trade
Indian exporters have raised urgent concerns about significant logistics disruptions and escalating costs following recent military actions in the Middle East. The situation unfolded after the United States and Israel launched strikes on Iran, prompting retaliatory attacks that have heightened tensions across the region. This geopolitical instability is now threatening to severely impact India's outbound shipments to critical markets such as the United States and Europe.
Immediate Impacts on Shipping and Air Routes
Industry bodies, including the Federation of Indian Export Organisations (FIEO), report that the conflict is already affecting global logistics channels. FIEO President SC Ralhan highlighted that air routes are being altered, and maritime trade through the Red Sea and key Gulf straits faces increased uncertainty. He warned that if diversions become prolonged, shipments may need to reroute via the Cape of Good Hope, adding an estimated 15–20 days to transit times for Europe and the United States.
Ralhan further explained that heightened geopolitical risks typically lead to higher marine insurance premiums, which raise 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 added. These concerns follow Iran's retaliatory strikes targeting several American military bases in the Middle East, including locations in Qatar, Kuwait, and the United Arab Emirates (UAE).
Echoes from the Export Community
Other industry leaders have voiced similar apprehensions. Apparel Export Promotion Council Chairman A Sakthivel expressed worry over potential shipment delays. "We are concerned that our shipments may get delayed due to this tension. We may have to take long routes to send our goods to Europe, the USA, and other western countries," he said. Exporters recall that tensions in 2024, following the Israel-Hamas war, had severely impacted shipments via the Red Sea route, forcing vessels to take longer detours.
An exporter from the leather sector noted, "We may face similar problems now if the war continues for long." The Red Sea and Bab-el-Mandeb Strait form a critical shipping artery for India's trade, with nearly 65 per cent of India's crude oil imports from countries like Iraq and Saudi Arabia passing through the Suez Canal. This route via the Arabian Sea, Red Sea, and Suez Canal is shorter and faster than the Cape of Good Hope passage around Africa, making it the preferred option for most shipping companies.
Potential Long-Term Consequences and Industry Calls for Support
If hostilities intensify, vessels may avoid the Suez Canal and take the longer Cape route, potentially adding 14–20 days to transit time and significantly increasing freight and insurance costs. This scenario mirrors the Red Sea crisis in late 2023, triggered by attacks on cargo vessels by Iran-backed Houthis near the Yemeni coast, which disrupted global supply chains. The Suez Canal route accounts for about 30 per cent of global container trade.
Shipping companies are likely to raise freight rates for shipments from the Indian subcontinent to North Europe in response to increased risks and operational costs. Sharad Kumar Saraf, a Mumbai-based exporter and founder chairman of Technocraft Industries India, described the situation as fluid. "Geopolitical situation is very fluid at present. It is keeping us on our toes and exporters are completely shattered, they do not know what is going to happen next. We need immediate government support," he said.
Saraf added that shipping costs could jump and consignments may take longer to reach Europe and the US if vessels are forced to encircle Africa via the Cape of Good Hope. Exporters are closely monitoring developments, warning that sustained instability in these critical trade corridors would require calibrated policy support to help maintain competitiveness in global markets.
Government Response and Broader Implications
In response to the escalating tensions, India has urged all sides to exercise restraint and avoid further escalation, asserting that the sovereignty and territorial integrity of all countries must be respected. This diplomatic stance underscores the broader implications for international trade and stability.
As the conflict unfolds, Indian exporters remain vigilant, emphasizing the need for strategic interventions to mitigate the adverse effects on logistics and costs. The ongoing volatility in the Middle East continues to pose significant challenges to global commerce, with India's export sector at the forefront of these disruptions.
