Middle East Tensions Threaten Global Trade, Spike Oil Prices

Recent military actions by the US and Israel against Iran have heightened tensions in the Middle East, triggering potential disruptions in global trade. Experts predict a surge in freight and insurance costs, coupled with delayed cargo shipments, will drive up global oil prices and consequently increase India's import bill.

Due to the closure of the Strait of Hormuz by Iran, a crucial transit point for a significant share of India's crude oil and LNG imports, experts forecast substantial trade impacts. The Global Trade Research Initiative highlights the looming threat of rising freight costs, heightened insurance premiums, and inflated fuel prices, which could worsen India's current account deficit.

The ongoing conflict could also derail India's free trade agreement negotiations with the GCC and complicate logistics as maritime trade faces uncertainties. Diversions via longer routes like the Cape of Good Hope may extend transit times significantly, affecting European and US-bound shipments, while exacerbating concerns over global oil price hikes.