India must prioritise the review of energy risk scenarios in the backdrop of boiling tensions in the Middle East, Global Trade Research Initiative (GTRI) said in a note.
The think tank urged the government to diversity crude sourcing and to ensure strategic reserves are sufficient as Iran and Israel escalate attack on each other’s key assets.
The country is increasingly at “risk of collateral economic fallout” because of the war, GTRI said, adding that energy security and other commercial interests are facing “growing uncertainty”.
"The escalating hostilities and rising regional tensions are posing direct threats to India's strategic and economic links with West Asia," GTRI Founder Ajay Srivastava said, adding India has significant trade exposure to both warring nations.
India exported goods worth $1.24 billion to Iran and imported $441.9 million in return in 2024-25. Trade with Israel was even more substantial, with $2.15 billion in exports and $1.61 billion in imports.
"But more critical than these bilateral flows is India's reliance on the region for energy: nearly two-thirds of its crude oil and half of its LNG imports pass through the Strait of Hormuz, which Iran has now threatened to close," he said.
This narrow waterway, only 21 miles wide at its narrowest point, handles nearly a fifth of global oil trade and is indispensable to India, which depends on imports for over 80 per cent of its energy needs.
He said that any closure or military disruption in the Strait of Hormuz would sharply increase oil prices, shipping costs, and insurance premiums, triggering inflation, pressuring the rupee, and complicating India's fiscal management.
The risks became even more immediate on June 15, when Iran fired missiles at Israel's Haifa port -- a facility handling over 30 per cent of Israeli imports and 70 per cent owned by India's Adani Ports, Srivastava said.
Initial reports indicate damage to port infrastructure and nearby refineries, raising fears of disrupted logistics and a spillover of conflict into Indian commercial operations, he said.
Meanwhile, Israel's June 14-15 strike on Houthi military leadership in Yemen has heightened tensions in the Red Sea region, where Houthi forces have already attacked commercial shipping.
"For India, this poses another serious risk. Nearly 30 percent of India's westbound exports to Europe, North Africa, and the US East Coast travel through the Bab el-Mandeb Strait, now vulnerable to further disruption," he noted.
With PTI inputs
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