Exporters Concerned About Increased Logistics Costs Amid Israel-Iran Conflict

The Growing Conflict Between Iran and Israel and Its Impact on Global Trade

The escalating tensions between Iran and Israel are posing a significant threat to global trade, particularly by driving up freight and insurance costs as shipping companies seek alternative routes away from the crucial Red Sea and potentially the Strait of Hormuz. This shift in trade routes could result in higher energy prices, a decline in global demand, and increased inflation, according to experts.

Challenges for India’s Foreign Trade

The recent outbreak of conflict has disrupted cargo movement through the Red Sea routes, causing delays and added expenses for Indian exporters. The closure of these routes may lead to elevated freight costs, ultimately impacting businesses involved in international trade. The possibility of the conflict expanding to involve other countries adds further uncertainty to the situation and could have a significant impact on global crude oil prices.

The Role of the Red Sea and the Strait of Hormuz

Aside from the Red Sea routes, transit through the strategic Strait of Hormuz is another area of concern for world energy trade. With tensions rising, there are concerns about potential disruptions to this crucial passageway, through which a significant portion of global petroleum liquids consumption flows. The impact of these developments on energy prices could lead to inflation and reduced demand in key markets.

Implications for India’s Trade Relations

The conflict is expected to have a direct impact on India’s trade with Iran and Israel. Recent attacks have already resulted in a decrease in exports to Israel, while trade with Iran is also likely to suffer. The ongoing geopolitical uncertainties, coupled with the impact of the US-China trade war, are creating challenges for global trade, with the World Trade Organization projecting a contraction in trade volume for the year.