Escalating tensions in the ongoing US–Israel conflict with Iran could disrupt global trade flows and increase energy costs if the regional conflict persists, industry body ASSOCHAM has warned. 

The chamber said prolonged instability in West Asia may create wider trade disruptions for the global economy, as several countries, including India, are closely linked to the region through energy imports, supply chains, and export markets in the Gulf. 

Energy supplies and inflation risks 

West Asia remains a key supplier of crude oil, liquefied natural gas (LNG), petrochemicals, fertilisers, and aluminium. One of the major concerns arising from the escalating Israel–Iran conflict is the potential disruption of shipments through the Strait of Hormuz, a strategic shipping route through which nearly 20% of the world’s oil supply and a significant share of global LNG trade passes. 

Any prolonged disruption to shipping routes could push global fuel prices higher, ASSOCHAM said, adding that since energy is a critical input for manufacturing and logistics, rising fuel costs could increase supply chain costs globally. 

India, which relies heavily on imported crude oil, may face macroeconomic pressures if global energy prices remain elevated. Higher oil prices could widen the country’s current account deficit, add to inflationary pressures and weigh on growth prospects. 

Commenting on the evolving situation, ASSOCHAM president N.K. Minda said the Gulf region also plays a crucial role beyond trade due to its large Indian diaspora. 

“Beyond goods trade, the Gulf is home to a large share of the Indian diaspora which work in the construction, healthcare, hospitality, and tourism industries. According to India's Remittances Survey for 2023–24 by the Reserve Bank of India, the UAE alone contributed 19.2% of India’s total inward remittances. The countries in the conflict affected region form one of India’s most important remittance channels,” he said. 

Trade, supply chains may face disruptions 

ASSOCHAM Secretary General Col. Saurabh Sanyal said West Asia is an important source of essential commodities for India. 

“In 2025, India’s imports from the region of ~ $98.7 billion included critical resources such as energy, fertilisers and industrial inputs. Energy-intensive industries are likely to face challenges. At a time when global trade is witnessing heightened volatility and tariff uncertainty, such developments adversely impact trade predictability, stability and long-term confidence for businesses,” Sanyal said. 

The chamber added that disruptions to maritime routes in the Gulf have already delayed container shipments and deliveries in several regions. As India both exports to and imports from the conflict-affected region, sectors such as gems and jewellery, pharmaceuticals, electronics, petroleum products and agriculture could face supply disruptions if the conflict prolongs.