The ongoing conflict between Iran and Israel is causing global tension due to rising crude oil prices, which may continue to increase. This situation is affecting stock markets worldwide. There are concerns that if the conflict exacerbates, it could disrupt the global supply chain, posing a threat of inflation and economic slowdown in several countries.
India has substantial trade relations with both countries. It imports numerous items, and a disruption in the global supply chain will have a visible impact on India as well. Although India does not import much crude oil directly from Iran, supply chain disruptions could make exports expensive.
Why is this particularly concerning for India?
Iran produces 3% of the world's crude oil, and many imports to India travel through routes affected by the Middle East tensions. According to a report by The Hindu, tensions between Israel and Iran could increase India's export costs by 40-50%, while a report in ET predicts a 15-20% rise in export costs.
Major concerns over crude oil
India imports 85% of its crude oil. Despite less direct import from Iran, conflict-induced global price hikes will increase the cost of crude oil imports. Approximately 20% of global oil flows through the Strait of Hormuz, located between Iran to the north and the Arabian Peninsula to the south. Any disturbance in this strait could further affect shipments.
Flight costs expected to rise
As Pakistan's airspace is already closed for India, the closure of Iranian airspace will further inflate flight costs, affecting Indian airlines and increasing ticket prices for passengers.
The scale of India's trade with Iran and Israel
Speaking of trade with Israel, India exported goods worth $2.1 billion to Israel in FY 2025, while importing $1.6 billion worth of goods. Also, India exported $1.2 billion to Iran and imported goods worth $441.9 million, bringing the total trade with both countries to approximately $5 billion.
What does India import from Israel?
India supplies cut diamonds, jewelry, consumer electronics, and engineering goods to Israel, which, in turn, exports substantial military hardware to India. Israel ranks 32nd among India's trading partners and is a major defense supplier.
The Stockholm International Peace Research Institute reports that over the past decade, India has imported military hardware worth about $3 billion from Israel, including radars, surveillance and combat drones, and missiles. Additionally, India imports pearls, precious stones, electrical, electronics equipment, fertilizers, and chemical products from Israel.
What does India import from Iran?
Apart from Israel, India trades with Iran as well. From Iran, India imports dry fruits, chemicals, and glassware, aside from crude oil. Iran is a major importer of basmati rice from India, which, along with tea, coffee, and sugar, are India's major exports to Iran.
