Why India should be worried about war between Israel, Iran

Why India should be worried about war between Israel, Iran

After Israel's initial strikes on Iran on Friday, Minister of External Affairs Subrahmanyam Jaishankar held a phone conversation with his Iranian counterpart, Abbas Araghchi, in which he "conveyed the deep concern of the international community at the turn of events."

The two nations have been exchanging missile and drone strikes, targeting energy infrastructure and residential areas, since.

The situation has already started affecting Indian markets, with the Sensex dropping 573 points on Friday.

Strait of Hormuz crucial for India's oil supply

While Iran isn't an oil supplier to India due to US sanctions, the Strait of Hormuz remains a concern.

This strait, located between Iran to the north and the Arabian Peninsula to the south, is crucial as it carries nearly 20% of the world's oil supply.

Any disruption here could affect shipments from Iraq, Saudi Arabia, and the UAE—India's key suppliers.

Cargo vessels may have to take longer routes

Moreover, if the conflict continues, cargo vessels may have to take longer routes like the Cape of Good Hope instead of the Red Sea route, increasing time and costs.

For example, the Red Sea crisis, in which Houthis attacked vessels, caused a spike in transportation expenses.

Furthermore, longer voyages reduced vessel availability, putting inflationary pressure on freight costs.

Flight diversions already reported at Delhi airport

Both Iran and Israel have closed their airspaces after Friday's attack.

This closure of airspace by Iran and Israel could disrupt the global aviation sector, including India's.

Delhi Airport has already reported that some flight schedules have been impacted due to changing airspace conditions over Iran, Iraq, and nearby areas.

These diversions could lead to longer flights, delays, and higher fuel costs for airlines operating in and out of West Asia.

India unlikely to be significantly impacted by conflict

On a better note, most analysts believe that unless the Israel-Iran conflict escalates into a wider regional war, it will not have any major economic impact on India.

A senior government official told the Economic Times that India's strong macroeconomic fundamentals would help it weather any global crisis.

Banking and market expert Ajay Bagga also agreed with this view, saying markets will likely shrug off the conflict as boundaries get defined and the risk of a regional war recedes.

Iran opens land borders

As of Sunday, all Indians in Israel are safe, the Indian embassy said, adding it is continuously monitoring the situation.

Meanwhile, in Iran, the land borders have been opened for the safe evacuation of Indian nationals.

"Given the current condition and the closure of the country's airports, as well as the request of many political missions to transfer their diplomats and nationals abroad, we inform that all land borders are open for crossing," the Foreign Minister of Iran said.