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Informist, Monday, Jun. 23, 2025

 

NEW DELHI – The Federation of Indian Export Organisations anticipates some short-term impact on demand and logistics from the recent flare-up of geopolitical tensions in West Asia, its President S.C. Ralhan said in a note Monday, adding that India's export sector continues to remain resilient. The likely impact may be more in the Gulf region, which serves as a crucial hub for Indian exports. 

 

"Increased shipping costs, longer transit times, and rising marine insurance premiums may add pressure, especially in price-sensitive sectors," Ralhan said. FIEO is the apex trade promotion organisation set up by the Ministry of Commerce and Industry. "The government and industry are jointly monitoring developments to ensure minimal disruption," he said.

 

Tensions in West Asia rose after Israel struck several Iranian military and scientific targets, including nuclear facilities, on Jun. 13 as part of "Operation Rising Lion" to stop Iran from developing nuclear weapons. Iranian media reported multiple explosions in the country, including at its biggest nuclear enrichment facility in Natanz. Israel thereafter declared a state of emergency to deal with the likely retaliation by Iran.

 

The situation worsened Sunday after the US attacked three nuclear sites in Iran--Fordow, Natanz, and Isfahan. "A full payload of bombs was dropped on the primary site, Fordow," President Donald Trump wrote on social media.

 

Following these developments, Iran's parliament has reportedly voted to close the Strait of Hormuz, the only marine entry into the Persian Gulf. The strait divides Iran from Oman and the United Arab Emirates and links the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is the world's most important oil chokepoint because more than 20% of the world's oil passes through the strait.

 

According to the FIEO, volatility in crude oil price is being "closely watched as it can influence both inflation and logistics costs" but India's diversified energy procurement strategy and the Reserve Bank of India's proactive policy stance will help to maintain liquidity and macroeconomic stability.

 

Following Israel's attack on Iran, crude oil prices had surged over 13% to $78.50 per barrel on Jun. 16, the highest level since Jan. 27, due to worries about potential disruption in supply of crude oil as the conflict intensified. Iran holds over 9% of the world's crude oil reserves and currently produces over 3% of the world's crude oil output.

 

Washington's involvement in the conflict has sent fresh jitters across markets, leading to crude oil prices hitting a five-month high of $81.39 per barrel Monday. At 1400 IST, the August contract of Brent crude oil was at $76.55 per barrel.

 

Despite these "temporary headwinds", the FIEO said this could be an opportunity for Indian exporters to explore alternative routes, strengthen regional partnerships, and consolidate India's role as a reliable trade partner in uncertain times. "The robust MSME (micro, small, and medium enterprises) and large-scale exporters, coupled with strong government support mechanisms, will help cushion any near-term shocks," Ralhan said.  End

 

US$1 = INR 86.71

IST, or Indian Standard Time, is five-and-a-half hours ahead of GMT

 

Reported by Priyasmita Dutta

Edited by Rajeev Pai

 

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