The escalating confrontation between the United States and Iran has created major geopolitical and economic challenges for India, which has deep strategic, energy and diasporic ties throughout West Asia, which is currently in turmoil. The US and Israel jointly launched strikes on Iran on February 28 following failed nuclear talks. The attacks killed Supreme Leader Ayatollah Ali Khamenei along with many others after missiles hit his home office in Tehran.
With the Strait of Hormuz still closed — a move that has the potential to disrupt roughly a fifth of global oil supplies and drive up oil prices — and the conflict escalating by the day, India faces heightened concerns about possible disruptions to commodity prices, labor transfers and businesses that have expanded into the region.
Tankers passing through the Strait of Hormuz, which borders Iran to the north, carry energy supplies from Saudi Arabia, Kuwait, Iraq, Qatar, Bahrain, the UAE and Iran. About 20% of the world’s daily oil consumption passes through the Strait of Hormuz.
Read also | Gulf countries face a food security challenge as conflict in the Middle East widens
Most of the region’s oil and gas is destined for Asia, so any disruption to traffic in the narrow Strait of Hormuz could significantly affect global energy trade. Recently, amid Donald Trump’s push to curb Russian oil imports, India has been expanding its energy ties in the Persian Gulf, which is now facing renewed conflict and attacks.
JPMorgan analysts said in a note that oil supplies from Iraq and Kuwait could begin to shut down within days if the Strait of Hormuz remains closed, which could cut 3.3 million barrels a day by the 8th day of the conflict. The conflict has already entered the 6th day.
On India, Brokerage Jefferies Group said: “Prolonged conflict coupled with a big jump in energy prices would be a big macro negative (for India)”. He further noted that the Middle East region accounts for 17% of India’s exports, provides 55% of crude oil and 38% of labor remittances.
In an interview with Livemint, Amb Anil Trigunayat explained how the security and stability of West Asia, which is currently in conflict, is of existential importance to India. “This is because of the 4Es i.e. energy supply and security (60-70%); economic engagement (over $100 billion and presence of thousands of Indian companies and their investments and commitments in India will also suffer. Ease of navigation will be affected Redea/Suez and Strat of Hormuz (75% transit dependency)),” he said, adding that there is a need to ensure the security of India’s 10 million states.
Read also | US-Iran War Raises Oil: Why ONGC, Oil India May Emerge Biggest Gainers
“This is a defining moment for the regional balance of power and a challenge for India,” he said.
Praveen Donthi, senior analyst at the International Crisis Group, told Livemint that the US-Iran conflict could have a bigger impact on India and its economy than any other, “because of the organic linkages that have developed over time”.
Talking about labor remittances from these countries, Praveen Donthi said, “Nearly 10 million Indians live in the Gulf countries and send remittances home.” He also added that India has been receiving significant investment from sovereign wealth funds based in the region.
“About 50% of India’s oil imports and 60% of its LNG pass through the Strait of Hormuz, which has been blocked by Iran. India holds only 25 days of oil and fuel reserves, making it highly vulnerable to supply disruptions. Gold and diamond shortages are also likely,” he said.
According to the Tea Association of India, tea exports could also face a huge disruption if shipping through the Strait of Hormuz remains closed. It said the large shipment passes through the strait to Iraq, Iran, Kuwait, Saudi Arabia, Bahrain, Qatar and the UAE in the Persian Gulf.
In 2025, India exported about 280 million kg of tea, of which nearly 41%, 115 million kg, was sent to the UAE, Iran and Iraq together, the association said.
If Hormuz remains closed to trade, “it will have a serious impact on India’s tea exports”.
So what can India do to manage the turbulence in the Middle East? Donthi said, “India will have to diversify its oil sources and increase imports from Russia, which will require persuasion from the Trump administration. It will be a test of India’s strategic autonomy and its ability to navigate a turbulent world.”
