Israel–Iran Geopolitical Tensions: How the Conflict Could Impact India’s Oil, Trade, Internet

As tensions rise between Israel and Iran, India finds itself at a vulnerable crossroads. From rising oil prices and disrupted Basmati rice payments to undersea cable threats and strategic port interests in Iran, the ripple effects of this geopolitical crisis are already visible across India's economy, digital infrastructure, and foreign policy. This article explores the multiple ways in which this conflict could impact India’s national interests.

Israel-Iran War Could Disrupt India’s Oil Imports

India imports more than 80% of its crude oil requirements, a significant portion of which passes through the Strait of Hormuz. This narrow passage lies close to Iran and has historically been a hotspot during regional tensions. If the conflict escalates into a military blockade or shipping disruptions, India could face supply shortages and a spike in global oil prices.

Past events provide precedent. During the 2019 Gulf crisis, insurance premiums on tankers surged up to 20%, and oil prices jumped by 4 to 5%. For an oil-dependent country like India, this translates into a higher import bill and greater inflationary pressure.

Basmati Rice Trade Feels the Strain

Iran is one of the largest buyers of Indian Basmati rice, especially from Punjab and Haryana. In FY 2024–25, Iran imported over 8.55 lakh metric tonnes worth nearly ₹6,374 crore. In strong trade cycles, the country accounts for up to 35% of India's total Basmati exports.

However, worsening relations and pre-existing payment delays are taking a toll. Private Iranian importers now often take 6 to 8 months to release payments. Even Iran’s Government Trading Corporation has delayed transactions for up to 180 days. Indian exporters are being forced to look for alternate markets, even at reduced profit margins, just to maintain cash flow.

Rising Volatility in Indian Stock Markets

India’s stock markets are reacting sharply to geopolitical developments in West Asia. Increased tension in the region typically prompts a risk-off approach from global investors.

Strategic Investment in Chabahar Port Faces Uncertainty

Chabahar Port in Iran is a cornerstone of India's strategic outreach to Central Asia and Afghanistan. Operated by India Ports Global Limited, the port is part of the International North–South Transport Corridor and was once exempt from US sanctions due to its development role.

However, the increasing tension between Iran and Israel places Chabahar in a vulnerable position. Military escalation or covert attacks could damage its facilities or reduce its commercial utility. Further, worsening regional conditions might lead to tighter Western sanctions, affecting port operations and shipping insurance.

India’s foreign policy challenge is now more delicate than ever. With growing security cooperation with Israel and infrastructure interests in Iran, it must manage both relationships without jeopardising long-term strategic goals.

Undersea Internet Cables at Risk

Submarine cables carry about 95% of the world’s internet traffic. Many of these cables, including FLAG, EIG, and SEA-ME-WE 5-pass through or near conflict-prone areas such as the Strait of Hormuz, Gulf of Oman, and Red Sea.

In 2024, regional conflict near the Red Sea led to the disruption of three major cables, causing connectivity issues across Asia, the Gulf, and Africa. India, which relies heavily on these cables for its ₹245 billion digital economy, is especially at risk.

A single cable break can reduce bandwidth by up to 70% in affected regions, according to a 2021 OECD report. This has major implications for India’s IT exports, banking services, and cloud operations.

To address these threats, India could explore alternative routes through partnerships with global tech companies. Monitoring systems like IMAC may also need to expand surveillance over submarine infrastructure to detect sabotage risks early.

Read More: Why Paying Too Much for Stocks Is Like Overpaying for Rent! 

Trade Corridors and Sanctions: A Growing Bottleneck

The International North–South Transport Corridor connects India to Russia and Central Asia via Iran, offering a vital alternative to China-backed routes. However, growing insecurity in the region has delayed progress.

Increased Israeli intelligence operations and Iran’s military posture complicate India’s use of Iranian infrastructure for transit trade. If Iran's global standing worsens further, India may face additional sanctions pressure, higher transit costs, and operational bottlenecks.

These setbacks weaken India’s broader objective of becoming a regional trade facilitator and limit its options for strategic autonomy in foreign trade.

Conclusion

The Israel–Iran conflict may be unfolding miles away from India's borders, but its impact is far-reaching. It is influencing everything from domestic inflation and digital traffic to food exports and foreign policy.

India’s economic and strategic vulnerabilities, especially in energy, agriculture, shipping, and digital connectivity, are being tested by this external shock. The ability to manage these risks will shape its global standing and internal stability in the months to come

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