Trade may take a hit if Israel-Hamas war widens, says commerce secretary

rade between India and Israel was estimated at $12 billion in FY23.

The commerce ministry said on October 13 that trade may be impacted if the war between Israel and Hamas escalates. The ministry, which is in a wait-and-watch mode following Hamas' Israeli incursion over the weekend and Israel's airstrikes on Gaza, expressed concerns over the conflict potentially widening.

"We need to wait and watch. Developments are happening on a daily basis. As of now, there is no impact," commerce secretary Sunil Barthwal said during a briefing on India's trade numbers for September.

Developments such as the US dispatching warships to assist Israel, speculation over Iran's involvement in the weekend attack and Lebanon-based militant group Hezbollah getting involved in the conflict have triggered worries of the war spreading to the other nations in West Asia.

Trade between India and Israel was estimated at $12 billion in FY23. While India's merchandise exports stood at $8.4 billion, imports from Israel amounted to $2.3 billion. Key items provided by New Delhi to Tel Aviv include diesel, cut and unpolished diamonds, electronics and telecom components. Both nations are also negotiating a free trade agreement.

The war between Israel and Hamas has sparked concerns over its impact on global trade at a time when a slowdown in major markets has dented demand for goods.

On October 13, World Trade Organization (WTO) chief Ngozi Okonjo-Iweala warned that a prolonged and wider conflict would have a "really big impact" on already weak global trade flows.

Last week, the WTO more than halved its growth forecast for global goods trade volume for 2023, citing persistent inflation, higher interest rates, a slowing Chinese economy and the war in Ukraine. It now expects a 0.8 percent growth compared to the 1.7 percent projected in April due to a continued slump in merchandise trade.

Moneycontrol wrote on October 10 that shipping costs and insurance premiums for Indian companies exporting to Tel Aviv may rise if the Israel-Hamas war continues, adding that trade could be seriously impacted if operations at Israel's three largest ports – Haifa, Ashdod, and Eilat – are disrupted.

Demand for Indian goods has been lukewarm due to recessionary trends in key trading partner nations. Merchandise exports fell 2.6 percent year on year in September.