Israel-Iran war: India must review energy risk scenarios, diversify crude sourcing, says GTRI

The Indian government must urgently review energy risk scenarios, diversify crude sourcing, and ensure strategic reserves are sufficient, according to the Global Trade Research Initiative.

India, though not a party to the conflict, cannot afford complacency, said the trade think tank.

As the Israel-Iran conflict intensifies, India is increasingly at risk of collateral economic fallout, with energy security, trade routes, and key commercial interests facing growing uncertainty, it warned. The escalating hostilities, and rising regional tensions pose direct threats to India’s strategic and economic links with West Asia.

India has significant trade exposure to both warring nations. In FY25, India exported goods worth $1.24 billion to Iran and imported $441.9 million in return. 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. 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% of its energy needs.

“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,” said GTRI.

The risks became even more immediate on June 15, when Iran fired missiles at Israel’s Haifa port—a facility handling over 30% of Israeli imports and 70% owned by India’s Adani Ports.

At the diplomatic level, India should use multilateral forums such as the G20 and the United Nations to advocate for de-escalation and the protection of global trade corridors, said GTRI.

Israel’s launch of “Operation Rising Lion” on June 13—deploying over 200 aircraft and Mossad-led drone strikes targeting Iran’s nuclear and military assets—has triggered a fierce Iranian response. More than 150 ballistic missiles and drone swarms have since struck Israeli cities, including Tel Aviv and Jerusalem, with casualties mounting and fears of broader escalation intensifying. Diplomatic efforts have collapsed, with the cancellation of U.S.–Iran nuclear talks in Oman, and regional markets are reeling.

China and Russia have condemned Israel’s actions, urging restraint and calling for diplomatic solutions. The United States, while reaffirming Israel’s right to self-defence, has also pressed both parties to de-escalate. But with both sides vowing to continue unless the other halts, the conflict shows little sign of abating.

GTRI said 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% of India’s westbound exports to Europe, North Africa, and the U.S. East Coast travel through the Bab el-Mandeb Strait—now vulnerable to further disruption. If shipping must be rerouted around the Cape of Good Hope, transit times could rise by up to two weeks, and costs could soar. This would directly impact Indian exports of engineering goods, textiles, and chemicals, while also raising input costs for key imports,” it cautioned.