The escalating conflict between Iran and Israel has prompted Centre to assess the trade situation with stakeholders after shipment costs spiralled higher by up to 50 percent within days, and the Strait of Hormuz is facing a threat of disruption.
“We will be calling a meeting this week of shipping lines, container corporations, stakeholders and relevant government departments to assess any issues being faced by them due to the Iran-Israel conflict,” Commerce Secretary Sunil Barthwal said on June 16.
Another senior ministry official said that initial reports suggest there are issues in the Strait of Hormuz, which may result be problems in the Red Sea trade. “If the Iran-Israel conflict gets prolonged, there will certainly be implications on trade. but, what those implications can be, we are assessing by getting in touch with exporters in the country,” the official added. The meeting will be aimed at safeguarding India's exports to UAE, Saudi Arabia, Qatar, Oman, Iraq, Kuwait, Iran and Israel, apart from European countries.
Nearly two-thirds of India's crude oil and half of the LNG imports pass through the Strait of Hormuz, a narrow waterway which could be at risk in the ongoing Israel-Iran war.
According to executives at oil marketing firms, the conflict between Iran and Israel has not led to a disruption in India’s crude oil supplies as of now, but may increase shipping and insurance costs if tensions escalate further. Petroleum Minister Hardeep Singh Puri said India is reviewing the global oil supply situation on a daily basis. “We have sufficient stocks,” he said.
The heightening tensions between the two Middle Eastern nations have triggered a dramatic spike in crude prices over fears of disruption in the global supply chain, as Iran threatens to close the Strait of Hormuz - a vital shipping route.
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Located between Iran on one side and Oman on the other, the Strait of Hormuz, is a narrow but strategic trade route that connects the Persian Gulf with the Gulf of Oman, extending to the Arabian Sea.
About one fifth of the total global oil output passes through the strait, linking major crude producers in the Middle East with key markets worldwide, especially Asia. It is also the route for around a quarter of the global LNG trade.
The Global Trade Research Initiative (GTRI) has warned that India, though not directly involved in the Iran-Israel conflict, cannot afford to remain complacent. “The government must urgently review energy risk scenarios, diversify crude sourcing, and ensure strategic reserves are sufficient”, it said, highlighting the need for stronger military preparedness in the Arabian Sea, especially around vital sea lanes and choke points.
Federation of Indian Export Organisations (FIEO) President SC Ralhan said the war could further hurt global trade. “The situation was gradually improving but now again the trade will be impacted. Our exports to Europe and countries like Russia may get hurt. Freight rates and insurance are expected to increase,” he said.
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