A widening of the Israel-Iran conflict, which looks highly likely after the US bombing of Iranian nuclear sites over the weekend, could impact 20 percent, or $224 billion, of India’s bilateral trade.
India today, however, is more insulated from the goings-on in the restive Middle East than it was a decade ago, a Moneycontrol analysis of trade data has found.
Trade between India and the Middle East and North Africa (MENA) region has barely grown in the past decade, rising from $217 billion in 2013 to $224 billion in 2024. The share of the region in India’s total trade has declined from 27 percent to 19.8 percent during the period.
A major reason for the shift is India’s reduced reliance on oil from the Middle Eastern countries. The region accounted for nearly a third of India’s imports in 2013 but the share has now fallen by almost 10 percentage points to 21.5 percent.
Much of the decline can be attributed to the Gulf Cooperation Council (GCC) countries, with the share of India’s imports dropping from 21.4 percent to 16.1 percent.
India’s exports to the MENA region, which includes Iran, Israel, the United Arab Emirates and Algeria, have also dipped over the past decade. From a peak of 21.8 percent in 2014, the region's share in India’s exports has fallen to 17.1 percent.
Less crude, more minerals
The nature of trade has also changed. In 2024, fuels accounted for only 43.8 percent of India’s trade with the region, compared to over 60 percent a decade earlier. Imports of minerals, including soda and fly ash and commodities such as coal, have risen, making up 26.6 percent of the trade compared to 12.7 percent in 2013.
India’s dependence on the Middle East for transportation equipment has grown. These imports now represent 20.6 percent of global imports, up from 4.9 percent in 2013.
A significant portion of this trade has become circular. Over a quarter of India’s transportation exports now go to the region, compared with just 18 percent a decade ago.
While India’s animal product exports have increased, food trade with the region has remained relatively steady.
What does all this mean?
The consequences of a potential wider regional conflict, however, will go well beyond bilateral trade.
Following the US bombing of Iranian nuclear facilities of Fordow, Natanz and Isfahan, Iran parliament has called for the closure of the Strait of Hormuz. The final decision, however, would be that of Iran's Supreme National Security Council.
About 20 percent of global oil and gas demand flows through the narrow channel, strait lies between Oman and Iran. Its closure will have consequences for oil prices, which were trading at a five-month high of $77.73 a barrel on June 23.
The big Red flag
The bigger problem could be the disruption of the Red Sea, Yemen’s rebel government has supported Iranian-backed Houthi’s threat resume attacks on US vessels and warships passing through the busy shipping route, reports have said.
According to a Crisil Ratings report, the Red Sea accounts for nearly half of India’s exports and around one-third of its imports. The route has previously been affected—two years ago, Houthis targeted commercial shipping vessels in retaliation for Israel’s military response to the Hamas October 7, 2023 attack.
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