Shipping rates from India are more or less stable right now despite the ongoing Iran-Israel conflict, but the feared closure of the Strait of Hormuz by Iran could send prices spiralling and the government is keeping a strict watch on it, sources said.
“The Commerce Department is closely watching the shipping rates as there is an apprehension that if the Strait of Hormuz is closed, there will be a major disruption in freight movement through the West Asian routes and rates may hit the roof,” a source tracking the matter said.
Alternative routes
The alternative routes, including via the Cape of Good Hope in South Africa, will increase travel time and costs. But these would need to be explored if needed, the source said.
The government is also in touch with other stakeholders, including air cargo companies, insurance companies, and cargo handlers, and will take appropriate action if there is a wider regional escalation and the situation deteriorates, the source said.
With the US entering the Israel-Iran war with its strikes on Iran’s key nuclear sites, Indian exporters and importers are now more anxious as Tehran has already started working on the option of closing the Strait of Hormuz.
The Iranian Parliament has already approved the closure of the Strait of Hormuz, key for transporting crude globally, while a final call is yet to be taken by the government.
Key concern
“A key concern is the potential disruption to the Strait of Hormuz, through which roughly 60–65 per cent of India’s crude imports transit. Any blockade or military escalation in this vital maritime corridor would severely impact India’s energy security, drive up oil prices, and trigger inflationary pressures at home,” pointed out Ajay Srivastava, GTRI, in a report.
A wider regional escalation could threaten India’s much larger trade with the broader West Asian region—including Iraq, Jordan, Lebanon, Syria, and Yemen—where Indian exports total $8.6 billion and imports stand at $33.1 billion, said Srivastava.