Crude, export shocks likely for India if US-Iran war escalates; mega investments at risk, say experts

Indian economy may face significant strain from rising oil prices, export losses, and stalled strategic investments if the current military confrontation between the United States and Iran escalates into a broader conflict, experts have warned. With energy supplies and trade flows closely tied to stability in the Middle East, even limited disruptions could send ripple effects through Indian markets, industry, and long-term investment plans. 

Oil price risks and energy security concerns 

“We import oil from 41 different countries today. So, our concern is not so much about supply. It is more about the price,” said Narendra Taneja, a leading energy expert. 

India sources crude oil from across the globe, but nearly half of its imports still transit through the Strait of Hormuz, the narrow waterway that handles about one-fifth of the world’s oil trade. Any serious disruption there would quickly tighten global supplies and push up fuel costs for Indian consumers and industries alike. 

“One immediate impact will be a rise in oil prices, which I think is inevitable. But this will not affect India alone. It will affect the entire world,” said strategic analyst Sushant Sarin. 

Sarin said rising crude and liquefied natural gas (LNG) costs could squeeze margins for Indian manufacturers and exporters while also increasing import bills. 

“If the Strait of Hormuz comes under conflict or is mined, around 20% of the global oil supply could be impacted,” Taneja added. 

Higher LNG prices are also at stake, as India imports much of its liquefied gas from Qatar. Any squeeze in shipping through Hormuz would tighten energy markets further. 

“If supplies from the Persian Gulf are disrupted, Russian oil may become more necessary,” Sarin said. 

“In that case, sanctions on Russian oil may need to be relaxed. Otherwise, there could be a serious global crisis in terms of pricing and supply.” That scenario could force New Delhi into tough policy choices, balancing geopolitical pressures with domestic energy security. 

Trade flows, remittances, and strategic projects at risk 

Beyond energy, both experts flagged risks to Indian livelihoods and trade flows. Large Indian communities reside in Gulf nations, and merchandise exports to these countries form an important slice of India’s external trade. India’s total trade with the Gulf Cooperation Council (GCC) bloc — including Saudi Arabia, the UAE, Qatar, Kuwait, Oman, and Bahrain — was about ₹178.6 billion in 2024-25, with exports near ₹56.9 billion and imports of ₹121.7 billion. 

“Another major concern is the roughly 90 lakh Indians working in that region,” Taneja said. Any prolonged conflict could affect remittances and the safety of people living in these countries, he added, noting how deeply intertwined India’s economy is with Gulf stability. 

“India has significant merchandise trade with countries like the UAE and Saudi Arabia. Any disruption would affect our exports as well,” Sarin warned. Trade figures show that exports to the UAE alone reached around ₹38 billion in the first half of 2025, underlining the size of these economic links. 

The Iran-India trading relationship is smaller but strategically significant. Bilateral trade stood at roughly ₹1.68 billion in 2024-25, with both imports and exports having declined in recent years. India also holds stakes in strategic infrastructure, such as the Chabahar port project, aimed at strengthening connectivity to Afghanistan and Central Asia. 

“If that port were damaged, it would have serious consequences. In the longer term, losing access would affect connectivity projects,” Sarin said, highlighting how instability could imperil years of planning and investment in regional logistics and trade corridors.