India's exports to Europe may be affected due to Iran-Israel conflict

Exporters are in a wait-and-watch mode as they expect air freight volume to Europe to rise 10-15%, logistics and insurance costs to rise and engineering exports demand to Europe to get impacted following Iran's attack on Israel. Already, the unfolding crisis in the Red Sea region is leading to shifting of large amount of cargo traffic to air mode such as leather goods, which were traditionally sent by ships, pushing up air freight volume. This has led to a surge in air cargo cost to Europe to about ₹140 per kg from ₹35 just three months ago.

"Air freight from India to Europe will rise 10-15%. Flying time will rise because you can't fly over Iran," said Ajay Sahai, director general, FIEO.

Longer routes have inflated shipping costs by 40-60% besides causing delays of around 20 days due to re-routing, higher insurance premiums of 15-20%, and potential cargo loss from piracy and attacks. "Exports to the European market will be affected. While 40% engineering exports are for maintenance, 60% exports are for new projects that will get impacted. We expect a 30-35% reduction in new project exports," said a Kolkata-based exporter.