The recent strikes on Iran by the US and Israel have led to retaliatory actions by Iran across several West Asian countries, including Saudi Arabia, the UAE, Kuwait, Qatar, Iraq, Bahrain, and Oman. Iran’s response, including disruptions in the Strait of Hormuz, has affected a key global shipping route that is vital for India’s imports and exports. West Asia accounts for a significant share of India’s trade, with around 14% of exports and 20% of imports linked to the region. As a result, the conflict poses meaningful risks to India’s trade flows, particularly in the form of higher freight costs, supply delays, and uncertainty over energy supplies. Elevated oil prices and higher inflation would adversely impact consumption demand, posing downside risks to ICRA’s GDP growth forecast of 7.1% for FY2027. ICRA has assessed the macroeconomic and the sectoral implications of the escalating US-Iran conflict and highlighted the likely impact if the tensions prolong.

Exhibit: India’s imports from key West Asian countries in FY2025 ($ million)

Source: Ministry of Commerce, ICRA Research