The Commerce Department is closely monitoring the ongoing Iran-Israel conflict and plans to meet with shipping lines, container firms, and other key stakeholders later this week to assess its impact on trade.
“We are convening a meeting with all shipping lines, container organizations, and relevant departments to understand the challenges they are facing and explore possible solutions,” an official stated. He noted that the actual impact would depend on how the situation evolves.
Exporters have raised concerns that the conflict may disrupt trade routes and drive up freight costs. Nearly two-thirds of India’s crude oil imports and half of its liquefied natural gas shipments pass through the Strait of Hormuz, which Iran has threatened to close.
This vital waterway, just 21 miles wide at its narrowest point, facilitates about 20% of global oil trade. It is especially critical for India, which imports over 80% of its energy needs.
According to the Global Trade Research Initiative (GTRI), any closure or military action in the Strait of Hormuz would likely lead to a spike in oil prices, shipping costs, and insurance premiums. These pressures could trigger inflation, weaken the rupee, and strain India’s fiscal management.
Further compounding the risk, Israel’s June 14-15 strike on Houthi leadership in Yemen has escalated tensions in the Red Sea. Houthi forces have previously targeted commercial vessels in the region.
The Bab el-Mandeb Strait, a key chokepoint through which nearly 30% of India’s west-bound exports to Europe, North Africa, and the U.S. East Coast pass, is also now at increased risk. Indian shipments that had started to resume movement through the Red Sea may once again face disruptions, GTRI warned.