Middle East Conflict Delivers Severe Blow to Gujarat's Manufacturing and Export Hub
The escalating war in the Middle East has inflicted a severe and immediate impact on businesses across Gujarat, India's premier manufacturing hub and maritime gateway that handles approximately 40% of the nation's EXIM cargo. The emerging energy crisis, triggered by significant disruptions at the critical Strait of Hormuz—which facilitates nearly half of India's crude oil imports—combined with a substantial $2,000 per container conflict surcharge imposed by major global shipping lines, is creating widespread uncertainty and financial strain.
Ceramics Hub in Morbi Faces Critical Gas Supply Issues
In Morbi, the renowned ceramic hub with an impressive annual turnover of Rs 60,000 crore, the primary concern revolves around maintaining an uninterrupted gas supply essential for keeping factories operational throughout the year. The industry has a substantial daily requirement of 55 lakh standard cubic metres (SCM) of propane gas, supplemented by 25–30 lakh SCM of piped natural gas.
Nilesh Jetpariya, a leading exporter from the region, highlighted the immediate challenges: "We experienced a supply issue from Saudi Arabia's Aramco just three days ago, which directly affected our propane availability. When we approached Gujarat Gas for a piped gas contract as an alternative, they were not prepared to add new customers at this time."
Currently, nearly 60% of Morbi's manufacturing units that depend on propane are receiving only about 30% of their required supply. Even if gas availability eventually stabilizes, exporters fear large-scale order cancellations amid the mounting geopolitical uncertainty and logistical complications.
Rajkot's Engineering Sector Experiences Ripple Effects
The ripple effects have spread decisively to Rajkot's vital engineering sector, which exports casting, forging, and automotive components to Gulf countries, accounting for a significant 20% to 25% of the city's total export revenue.
Paresh Patel, former president of the Rajkot Engineering Association, explained the logistical nightmare: "Dubai serves as the central hub for our regional distribution, and the Jebel Ali port is currently closed. Many of our shipments typically land at Jebel Ali before being transported by road to neighboring countries, creating a major bottleneck."
Port operations at Kandla and other key Gulf-linked maritime routes have also been severely disrupted. Vessel chartering companies report widespread disturbances across the entire region. Ashish Joshi, a freight forwarder based in Kandla, confirmed that mainline shipping operators have imposed a substantial conflict surcharge of up to $2,000 per container, adding significant cost pressure.
Insurance Premiums Soar and Cargo Movements Stalled
Insurance premiums for bulk carriers have risen sharply following recent revisions by Protection and Indemnity (P&I) clubs, creating additional uncertainty over coverage in high-risk waters. Exporters and importers alike state that absorbing these escalating additional costs is becoming increasingly difficult and unsustainable.
Ronak Shah, a customs house agent, reported that cargo movements have been severely impacted, with Jebel Ali—one of the region's most crucial seaports—facing major operational constraints and limitations.
According to detailed industry tracking data, hundreds of vessels, including numerous ships carrying Indian cargo, are currently stranded or significantly delayed in and around the Gulf region due to heightened security risks and updated navigational advisories. Vessel movement in the Upper Gulf has slowed considerably, with some advisories explicitly asking ships to remain stationary amid radar and security concerns.
Freight Rates Surge and Transit Times Lengthen
"There are strong indications of imminent freight hikes on Europe and US trade lanes," Shah added. "With vessels being rerouted via the Cape of Good Hope to avoid conflict zones, transit times are increasing substantially, bunker fuel consumption is rising, insurance premiums are higher, and overall vessel availability is shrinking. Shipping lines are likely to revise rates upward as capacity tightens further."
Industry sources confirmed that freight rates to Europe and the United States have already increased by $400–$500 per container. Ocean freight costs have jumped from approximately $1,100 to nearly $1,500 per container within just two to three days. Rates to other key destinations such as Egypt and Turkey—previously around $1,100—are also expected to climb further in the coming weeks.
Parthiv Dave, an Ahmedabad-based freight forwarder, noted that many exporters are temporarily holding back consignments due to uncertainty over routing and pricing. If vessels continue to avoid conflict-prone zones and reroute via the Cape of Good Hope, transit times could rise sharply, affecting delivery commitments and working capital cycles for businesses.
Several major international carriers have also placed booking restrictions on Middle East-bound cargo across global trade lanes until further notice, according to industry sources, compounding the challenges for Gujarat's export-dependent economy.
