Impact of Iran–Israel War on India: Which Imports and Exports Could Be Affected?

New Delhi: The ongoing conflict between Iran and Israel has escalated tensions across the Middle East, raising concerns about its potential economic impact on India. While India’s direct trade with Iran remains relatively small, the broader geopolitical situation could still influence certain sectors of the Indian economy.

Limited Direct Trade with Iran

In the financial year 2024–25, bilateral trade between India and Iran stood at approximately $1.68 billion, accounting for just 0.01% of India’s total bilateral trade of $1.74 trillion. This marks a sharp decline from $17.03 billion recorded in 2018–19, primarily due to US sanctions that significantly reduced India’s crude oil imports from Iran.

In 2024–25, India imported goods worth $440 million from Iran and exported goods worth $1.24 billion. Major Indian exports to Iran included basmati rice, tea, sugar, fresh fruits and pharmaceuticals. Imports from Iran mainly comprised apples, pistachios, dates and kiwi. Given this limited trade volume, the immediate economic impact on India from disruptions in Iran is expected to be minimal.

Possible Impact on Trade with Israel

However, the conflict may affect India’s growing trade ties with Israel. Over the past decade, India’s exports to Israel—particularly in defence and high-technology equipment—have increased by 21%. India’s imports of arms and ammunition from Israel rose from about $1 million in FY2013 to $104 million in FY2024.

During the same period, imports of aircraft, spacecraft and related components increased significantly from $31.8 million to $193 million. These figures reflect deepening strategic cooperation between the two countries. Any prolonged conflict could potentially disrupt defence supplies and technological collaborations.

Broader Global Trade and Energy Risks

Beyond bilateral trade, instability in the Middle East could have wider global consequences. Disruptions in the Red Sea corridor—an important route connecting Asia and Europe—may increase shipping and insurance costs. Higher logistics expenses could impact India’s exports to Western markets and raise the cost of importing energy and intermediate goods.

A major concern for India is the Strait of Hormuz, a critical maritime route through which nearly half of India’s monthly crude oil imports pass. Any blockade or military escalation in this region could significantly affect India’s energy security, potentially leading to higher fuel prices and inflationary pressure domestically.

In summary, while direct trade with Iran may not pose a major risk, prolonged conflict in the region could have indirect but substantial implications for India’s defence imports, shipping routes, energy supplies and overall economic stability.