India could end up paying more for oil, face trade disruptions if an all-out Iran-Israel war breaks out
As tensions continue to mount between Iran and Israel following the killing of Hassan Nasrallah and Tehran's retaliatory missile strike, the world is bracing for a war between the two bitter adversaries. The conflict, which could be played out on multiple fronts at the same time, including Iran, Syria, and Lebanon, will also have a major impact on the global economy and international trade.
How was could affect India
India too is likely to be affected by trade disruptions if a full-blown war breaks out. One of the major concerns for India is its oil supply. India currently does not import Iranian oil due to US sanctions, and earlier this year the country had decided not to resume imports due to the volatile situation in the region.
However, India, which imports around 85 per cent of its oil, may still be hit as an Iran-Israel war could push prices up and also disrupt supplies.
Strait of Hormuz
Nearly half of India's oil supplies come from the Middle East, through the Red Sea and the Strait of Hormuz. The Houthi rebels of Yemen, who are allied with Iran, may also be dragged into the war, and the militia, with their naval capabilities, could cut off oil supplies by blocking ships passing through the Strait of Hormuz, which connects the Persian Gulf with the Gulf of Oman and the Arabian Sea.
Attack on oil ships in Red Sea
In the Red Sea too, since last year, the Houthis have been actively involved in attacks on oil tankers and cargo ships. This had forced cargo ships to take a longer route through the Cape of Good Hope, making shipments more expensive.
Similar to oil, India's LNG supplies, which also come from the Middle East, would face supply disruptions if a war breaks out.
Impact on trade relations
Industry experts say that India's trade with the Middle East remains healthy due to friendly regional players such as Saudi Arabia, the UAE, Kuwait, and Qatar. Bilateral trade between India and the Gulf Cooperation Council (GCC) countries reached $162 billion last year.
As per the latest government data, the GCC now contributes 15 per cent of India's total trade, and sectors like energy, defence, security, and health are growing in the region.
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