Oil, trade risks for India amid Iran-Israel war

Escalating tensions between Iran and Israel pose a threat to India’s energy security. Disruptions in West Asia could lift oil prices, push inflation higher, pressure the rupee, and force exporters to seek alternative trade routes. The region remains India’s largest trading bloc at $178.5 billion, making stability critical. Anoushka Sawhney & Kritika Suneja take a look:

West Asia’s trade share has risen, while Iran and Israel remain marginal in India’s overall trade basket.

Share in India’s trade (%)

Country/Region	FY19	FY25
West Asia	14.4	15.4
Iran	2	0.1
Israel	0.7	0.3

(Note: West Asia includes Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, UAE.)

The UAE anchors India’s trade relationship with West Asia.

India-West Asia trade (FY25, $ b)

Country	Exports	Imports
Bahrain	0.8	0.8
Kuwait	1.9	8.3
Oman	4.1	6.5
Qatar	1.7	12.5
Saudi Arabia	11.8	30.1
UAE	36.6	63.4
Iran	1.2	0.4
Israel	2.1	1.5

The Strait of Hormuz remains a critical chokepoint. Around 40-50% of India’s crude imports, 55% of LNG supplies, and 80-90% of cooking gas imports pass through the Strait of Hormuz.

Benchmark Brent futures settled near $73 a barrel on Friday, around $6 higher since early February. Prolonged tensions could lead to higher oil risk.

The economic spillover could widen the current account deficit and increase pressure on the rupee. Remittance flows may turn vulnerable, while higher freight, insurance costs, transit delays, airspace curbs and supply chain costs could add to the burden.

West Asia is India’s third largest export market, accounting for 13% of India’s exports in FY25.

Major exports to GCC ($ billion)

Commodity	2023-24	2024-25
Mineral fuels, oils	11.2	9.9
Natural or cultured pearls	8.5	8.2
Electrical machinery & equipment	4.6	4.9
Aircraft, spacecraft & parts thereof	1.5	3.3
Nuclear reactors, boilers	2.7	3.3

Energy dominates imports from the region, accounting for 16.9% of imports in FY25.

Top imports ($ billion)

Commodity	2023-24	2024-25
Mineral fuels, oils	61.4	68.3
Natural or cultured pearls	20.8	27.8
Aircraft, spacecraft & parts thereof	3.6	4.2
Organic chemicals	3.0	3.3
Fertilisers	2.3	3.0

Source: Ministry of Commerce and Industry