Strait Of Hormuz Crisis: How India’s Exports And Economy Could Be Hit Hard

While India’s Red Sea trade routes remain unaffected and 90 per cent of cargo currently moves via the Cape of Good Hope, the possibility of a blockade at the Strait of Hormuz remains a serious threat.

This narrow chokepoint channels nearly one-fifth of global oil shipments and is critically important for India, which relies on imports for over 80 per cent of its energy requirements.

Source : Freepik

With tensions intensifying after US airstrikes on Iran’s nuclear facilities, concerns are growing over the possibility of Iran closing the strategically vital Strait of Hormuz.

Foreign Affairs Expert Robinder Sachdev warned of serious consequences for India should this scenario unfold. “...If Iran closes the Strait of Hormuz, India will definitely suffer. About 20 per cent of the world's crude oil and 25 per cent of the world's natural gas flows through these... India will suffer because oil prices will go up, inflation will rise, and there is an estimate that for every ten-dollar increase in the price of crude oil, India’s GDP will suffer by 0.5 per cent," Sachdev explained.

The recent escalation follows US B-2 bombers targeting three nuclear sites in Iran, provoking a strong reaction from Iran’s Supreme Leader Ayatollah Ali Khamenei.

He issued a sharp warning to Washington, stating, “Americans should expect greater damage and blows than ever before." Reinforcing this message, Hossein Shariatmadari, representing Khamenei, called for swift retaliation. “It is now our turn to act without delay. As a first step, we must launch a missile strike on the US naval fleet in Bahrain and simultaneously close the Strait of Hormuz to American, British, German, and French ships," he declared. Meanwhile, former US President Donald Trump responded firmly, saying, “Any retaliation by Iran against the United States of America will be met with force far greater than what was witnessed tonight. Thank you!"

 

#WATCH | Delhi | "...If Iran closes the Strait of Hormuz, India will definitely suffer. About 20 per cent of the world's crude oil and 25 per cent of the world's natural gas flows through these... India will suffer because oil prices will go up, inflation will rise, and there is… pic.twitter.com/pDllzAcPT7

— ANI (@ANI) June 22, 2025

Why Is Strait of Hormuz Important For India?

Amidst the escalating conflict, Indian exporters have begun voicing concerns about the potential disruption to trade routes. While India’s Red Sea trade routes remain unaffected and 90 per cent of cargo currently moves via the Cape of Good Hope, the possibility of a blockade at the Strait of Hormuz remains a serious threat. This narrow chokepoint, only 21 miles wide at its narrowest, channels nearly one-fifth of global oil shipments and is critically important for India, which relies on imports for over 80 per cent of its energy requirements.

During a meeting convened by Commerce Secretary Sunil Barthwal over the weekend, industry officials suggested diverting cargo traffic from Iran's Bandar Abbas port to Chabahar port. An official present at the meeting explained that the risk of further escalation could severely hamper trade with Afghanistan, Central Asia, and Russia, reported PTI.

“If Bandar Abbas port doesn't function, it will affect exports not only to Iran but to Afghanistan and Central Asia also. We have been informed that there is adequate capacity at Chabahar, and this needs to be explored urgently,” the news agency said quoting an exporter.

The Federation of Indian Export Organisations (FIEO) also indicated plans to consult with Chabahar port authorities regarding this shift. “We will enquire about the facilities at the port,” an official said, adding that the final decision will involve shipping lines and would be reviewed by DG Shipping.

What Can India Do If Strait Of Hormuz Closes?

Exporters have already observed a 15 per cent increase in air freight rates, with expectations of further hikes if the conflict continues.  Buyers are holding back orders, and many shipments are being delayed to avoid potential demurrage charges if cargo gets stranded at ports due to escalating tensions.

In the event the Strait of Hormuz becomes inaccessible, industry officials have highlighted alternative routes, suggesting reliance on Fujairah port in the UAE and ports in Oman. Presently, Bandar Abbas remains functional and continues to handle cargo destined for Afghanistan and CIS nations, including Russia. However, any prolonged conflict could disrupt not only trade with these regions but also exports to Gulf and Mediterranean markets.