As hostilities between Israel and Lebanon intensify, Indian exporters are increasingly concerned that the ongoing conflict may extend to other parts of the Middle East. Iran’s recent aerial attacks on Israel have added to the unease. While many exporters are adopting a “wait and watch” stance, they fear a decline in demand and rising logistical challenges should the conflict escalate further.
Dr. Ajay Sahai, Director General of the Federation of Indian Exporters Organization (FIEO), warns that any further escalation could cause setbacks in logistics. Freight charges had only recently begun to ease, but another surge could be looming. Sahai highlighted that demand for commodities like basmati rice might fall if Iran, a key market, is forced into wartime rationing for its citizens.
With Gulf Cooperation Council (GCC) countries being important trading partners for India, Sahai expressed concerns that any disruption to oil transport routes, particularly the Strait of Hormuz, could drive up India’s crude oil import costs.
Although Russian crude has offset India’s energy expenses during the Russia-Ukraine conflict, Sahai notes that those supplies could be jeopardized as the Houthis have entered the conflict near the Red Sea. Alternatives, such as sourcing Russian oil via the Strait of Malacca, would increase transit times and costs.
Vipul Shah, Chairman of the Gems and Jewellery Exports Promotion Council (GJEPC), explained that so far, the conflict has had no direct impact on India’s gems and jewellery exports. Israel, he said, isn’t a major importer of Indian gems, as the country has its own diamond-cutting facilities. However, Shah acknowledged that Iran is a significant market for Indian gems, and demand could be hit hard if the conflict worsens.
He added that the industry is bracing for potential impacts if the conflict spreads across the region, which could severely affect total exports to the Middle East.
For now, the situation remains uncertain, but exporters across multiple sectors are preparing for possible disruptions in the coming weeks.