Alternatives to Strait of Hormuz may raise cost and time for shipment of goods: Govt source

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Rising tensions in the Middle East have led to an increase in the cost of shipping and supply chain concerns, as Iran has hinted at blocking access through the crucial Strait of Hormuz.

According to a government official, shipping and freight costs are rising more due to market sentiment than actual disruptions on the ground — reflecting traders' anxiety over potential blockades.

The official added that while alternative shipping routes to Strait of Hormuz exist, these options would significantly increase transportation costs due to longer delivery times for goods.

As much as 65 percent of India’s crude oil shipments pass through the Strait of Hormuz.

Also Read - Iran plans to shut Strait of Hormuz: How it may shake global oil and why India is at risk too

The official said that the situation has become increasingly serious with Iran threatening to target US military bases and Yemen announcing its entry into the conflict, prompting heightened government vigilance over trade security.

The Red Sea, a key transit route for Indian trade with Europe and the United States, too is at risk with Yemen's Houthis threatening to attack US vessels and warships.

Nearly 30 percent of India’s exports to Europe, North Africa, and the US East Coast transit through the Red Sea's Bab el-Mandeb Strait.

The US' involvement in the conflict has raised concerns that Tehran may choose to retaliate by attacking American military bases in the West Asian region such as in Syria. Apart from that, Iran’s parliament has approved a measure to close the strategically vital Strait of Hormuz, their state-run Press TV reported on June 22.

To be sure, Iran's parliamentary vote is not binding, and a final decision has to be taken by the Supreme National Security Council.

The Indian government is monitoring the situation closely as the strategic waterway, through which nearly 20 percent of global oil passes, faces potential disruption in the ongoing Iran-Israel war, the official said.