Impact of Ongoing Israel-US Iran Conflict on India's Agri-food Exports to Gulf and Regional Shipping Costs

The ongoing conflict involving Israel, the US, and Iran is causing significant disruptions in Middle East shipping routes. This situation is raising insurance costs and threatening India's agri-food exports to the Gulf region, which are valued at $11.8 billion for 2025. Over 20% of India's total agricultural exports depend on these routes, making the conflict a critical concern for Indian farmers, processors, and exporters.

Shipping container vessel passing through Strait of Hormuz, a key Middle East shipping route

Disruption in Middle East Shipping Routes

The Strait of Hormuz is a vital chokepoint for global shipping, especially for oil and goods moving between Asia, the Middle East, and Europe. The conflict has increased tensions in this narrow waterway, leading to:

• Heightened security risks for vessels

• Increased insurance premiums for shipping companies

• Delays and rerouting of cargo ships to avoid conflict zones

  
  

These factors combine to raise the cost and complexity of shipping goods, including India's agri-food exports, to Gulf countries.

India's Agri-food Exports at Risk

India's agri-food exports to the Gulf are substantial, with $11.8 billion expected in 2025. The Gulf region accounts for over 20% of India's total agricultural exports. The conflict threatens this trade, especially for products with high dependence on Gulf markets.

Highest-risk products (70-99% exports to Gulf)

• Sheep and goat meat: 98.9% of exports go to Gulf countries, nearly $1 billion in value

• Beef: 97.4%

• Copra (dried coconut): 83.9%

• Beer: 81%

• Bananas: 79.6%

• Nutmeg and cardamom: 70.5%

  
  

These products face the greatest risk because their export markets are heavily concentrated in the Gulf, making them vulnerable to shipping disruptions and increased costs.

High-risk products (40%+ exports to Gulf)

• Tea: $410 million in exports

• Tobacco: $215 million

• Dairy fats: $203 million

• Soft drinks

• Coconut oil

• Vegetables

• Cheese

• Fruits

  
  

These products also rely significantly on Gulf markets, and any increase in shipping costs or delays could impact their competitiveness.

Medium-risk products

• Rice: $4.4 billion exported to Gulf countries, representing 36.7% of India's global rice exports

  
  

Rice exports are somewhat diversified but still face risks due to the Gulf's importance as a market.

Low-risk products

• Coffee

• Bakery products

• Sugar

• Shrimp

  
  

These products have less exposure to Gulf markets and are less likely to be affected by the conflict-related disruptions.

Impact on Indian Farmers and Processors

The disruption in exports affects multiple Indian states where these products are grown and processed. Farmers and processors face:

• Reduced demand or delayed payments due to shipping delays

• Increased costs passed on from higher freight and insurance premiums

• Pressure to find alternative markets or adjust production plans

  
  

States with large sheep and goat meat industries, copra production, and spice farming are particularly vulnerable.

Recommendations for Market Diversification

The Global Trade Risk Index (GTRI) suggests that Indian exporters diversify their markets to reduce dependence on the Gulf region. Strategies include:

• Expanding exports to Southeast Asia, Africa, and Europe

• Developing new trade agreements and partnerships

• Investing in logistics and supply chain resilience to handle alternative routes

  
  

Diversification can help mitigate risks from geopolitical conflicts and stabilize export revenues.

Broader Effects on Western Exports and Shipping Costs

The conflict's impact extends beyond India. Higher freight and insurance costs affect all Western exports passing through the Middle East. This could lead to:

• Increased prices for consumers globally

• Shifts in trade patterns as companies seek safer or cheaper routes

• Greater volatility in shipping schedules and costs

  
  

The instability in the Strait of Hormuz highlights the vulnerability of global trade to regional conflicts.

Preparing for Future Challenges

Indian exporters and policymakers must monitor the situation closely and prepare for ongoing uncertainty. Key steps include:

• Strengthening risk management and contingency planning

• Enhancing infrastructure to support alternative shipping routes

• Supporting farmers and processors with financial and technical assistance

• Promoting value addition and product diversification to reduce market risks

  
  

By taking proactive measures, India can protect its agri-food export sector and maintain its position in global markets despite geopolitical challenges.