Four weeks into the escalating conflict in West Asia involving the United States–Israel alliance and Iran, Indian exporters are facing a deepening crisis as trade with the region has nearly come to a halt. Industry stakeholders report that the disruption has severely impacted shipments, increased logistics costs, and created liquidity challenges across sectors.
Exports to West Asia—accounting for nearly 16% of India’s outbound trade—have “virtually come to a standstill” since March 1, according to Pankaj Chadha, Chairman of the Engineering Export Promotion Council. The disruption is largely attributed to the effective blockage of the Strait of Hormuz, a critical maritime gateway for trade with the region, alongside a sharp decline in air cargo availability.
In FY25, India exported goods worth $65.54 billion to West Asia, representing around 15% of total exports. The sudden interruption has not only impacted direct shipments but also increased costs for cargo rerouted via the Cape of Good Hope. Freight rates have surged by as much as $2,000 per container due to longer transit routes and operational challenges.
Manufacturers, particularly in the engineering sector, are also grappling with shortages of key fuels such as LPG and PNG, which are essential for industrial operations. This has led to production slowdowns and rising operational costs.
Adding to the strain is a mounting liquidity crunch, as exporters face delayed or blocked payments from buyers in West Asia. Sanjay Jain, a garments and textiles exporter, noted that importers in the region are struggling financially due to economic disruptions, leading to stalled payments and reduced purchasing activity.
Supply chain disruptions are also affecting industries dependent on petroleum-based inputs. The leather and footwear sector, for instance, has seen raw material costs—including rubber, polyurethane, and synthetic components—rise by 20–30%, pushing overall production costs up by at least 10%, according to Chennai-based exporter Israr Ahmed.
The Confederation of Indian Textile Industry (CITI) has warned that continued instability in West Asia poses significant risks to MSME-driven segments like textiles and apparel. Secretary General Chandrima Chatterjee emphasized that while recent government relief measures provide some support, a return to stability in the region is critical as FY26 progresses.
Meanwhile, the depreciation of the Indian rupee against the US dollar has offered limited relief. Exporters say the modest currency gains are insufficient to offset the sharp rise in production and logistics costs.
With supply chains under pressure and trade flows disrupted, industry stakeholders are closely watching developments in West Asia, hoping for an early resolution to restore stability to global and regional commerce.
