Amid worries that the growing crisis between Iran and Israel may impede trade via the Strait of Hormuz, a choke point that handles one-fifth of the world’s total oil supply, the government has instructed maritime companies to keep an eye out for alternative routes.
This decision was given during a June 20 meeting with shipping lines and container companies, among others, to evaluate how the Iran-Israel war will affect trade with India. The meeting was headed by Commerce Secretary Sunil Barthwal.
Participants in the industry cautioned that heightened tensions would impede critical shipping lanes like the Red Sea and the Strait of Hormuz, which are essential for the world’s oil trade and India’s energy imports. Any embargo or military action in these areas might result in soaring oil prices, higher shipping expenses, and higher insurance premiums, according to industry analysts at the Global Trade Research Initiative (GTRI).
According to sources, specifically, Indian exports to Europe, US and to a certain extent to South America may get impacted if the flow of goods through the Strait of Hormuz is disrupted or if Iran implements its repeated threat of closing the route. While the Iran-Israel war, which began on June 13, hasn’t yet had a direct impact on India’s trade or disrupted crude supplies from the Middle East, shipping and insurance costs have risen for oil refiners.
Stakeholders also raised concerns to the central government that if the conflict widens then the “already sensitive” route of Red Sea may get impacted too. Commerce ministry asked shipping lines to keep monitoring the situation around Suez Canal and in case of any escalation look for alternate routes for Indian exports to Europe.
The GTRI had warned earlier any disruptions to the Strait of Hormuz could lead to a sharp spike in oil prices. “The government must urgently review energy risk scenarios, diversify crude sourcing, and ensure strategic reserves are sufficient,” it said, highlighting the need for stronger military preparedness in the Arabian Sea, especially around vital sea lanes and choke points.
