Israel-Iran conflict may impact oil supply to India, spike export costs

Israel-Iran Conflict Impact on India

1. Impact on Oil Prices & Inflation

• Global crude oil prices surged ~8% in one day following Israel’s attack on Iran.

• India, which imports ~80% of its crude oil, is vulnerable to global oil price shocks, even though direct imports from Iran are low.

• Inflation risk rises significantly due to this dependence.

2. Strategic Chokepoint – Strait of Hormuz

• ~20% of global oil trade passes through the Strait of Hormuz (between Iran & Arabian Peninsula).

• Disruption could affect key suppliers to India: Iraq, Saudi Arabia, UAE.

3. Trade & Export Disruptions

• Ongoing tensions may lead to closure of the Suez Canal & Red Sea routes.

• Exports rerouted via Cape of Good Hope will:

  • Add 15–20 days transit time

  • Raise costs by $500–1,000 per container

  • Cause 40–50% increase in export costs

4. Impact on Gold & Investor Sentiment

• Gold prices surged to ₹1 lakh per 10g, seen as a safe haven during geopolitical instability.

• Analysts note this is part of a broader uptrend driven by:

  • Central bank gold purchases

  • Long-term inflation concerns