Iran-Israel War May Hike Freight Rates by 50%, Hit Indian Exporters Hard

Key Points

• The ongoing Iran-Israel conflict has heightened global economic and trade uncertainties, directly impacting India’s export sector.
• Indian exporters warn of a potential 50% surge in freight and insurance costs if the conflict continues.
• Key shipping routes like the Red Sea and Strait of Hormuz are at risk, threatening trade flows to Europe, Russia, and the UAE.
• Crude oil prices could spike to $150 per barrel if the conflict escalates, significantly increasing India’s import bill.
• Exporters urge close monitoring, as prolonged conflict could severely disrupt global supply chains and trade recovery.

New Delhi: The four-day-long military conflict between Iran and Israel has cast a shadow over global trade, sending shockwaves through shipping, insurance, and commodity markets. India, a major player in international exports, is particularly vulnerable to these disruptions, with exporters bracing for higher costs and logistical challenges.

Freight and Insurance Costs Set to Soar

According to President of the Federation of Indian Export Organizations (FIEO), the global trade environment had started showing signs of recovery after months of volatility. However, the renewed hostilities in the Middle East have reignited uncertainty, threatening to derail this progress. Exporters are especially concerned about the likely surge in freight and insurance costs for shipments passing through conflict-affected regions.

Experts, highlights that shipping lines had only recently resumed using the Red Sea route, which saves 15-20 days for cargo moving from India and Asia to Europe and the Americas. Now, with the escalation in hostilities, shipping companies are once again considering detours to avoid these high-risk zones. If the conflict persists for more than a week, freight costs could jump by up to 50%, with the added burden being passed on to Indian traders and exporters.

Key Trade Routes Under Threat

The Strait of Hormuz and the Red Sea are vital corridors for global commerce, including India’s exports to Europe, Russia, and the UAE. Any disruption or closure of these routes would not only delay shipments but also increase operational costs due to longer travel times and higher insurance premiums. Exporters fear that continued conflict could force vessels to reroute around Africa’s Cape of Good Hope, significantly extending delivery times and costs.

Crude Oil Prices Could Skyrocket

experts also warns that the biggest risk lies in energy markets. The Middle East is the world’s primary oil-exporting region, and any escalation could send crude oil prices soaring. Market analysts suggest that if the conflict widens or draws in other regional powers, Brent crude prices could surge to as high as $150 per barrel more than double current levels. Such a spike would have a domino effect on inflation, logistics, and the overall cost structure of Indian exports and imports.

Ripple Effect on Indian Economy

Rising freight and energy costs could erode the competitiveness of Indian goods in global markets, especially as exporters contend with already thin margins. Higher costs may also reduce demand from key trading partners, further slowing India’s export growth. The situation is being closely monitored by government agencies and trade bodies, who are preparing contingency plans for worst-case scenarios.

Summary Table: Impact of Iran-Israel Conflict on Indian Trade