Iran-Israel Conflict: Multi-Sector Cost Impact on India Across Oil, Basmati, and Textiles
The US-Israel military strikes on Iran (late February 2026) and the resulting Hormuz disruption have threatened to raise costs for Indian consumers across multiple sectors simultaneously.
Crude oil and petroleum product prices are rising due to supply disruption through the Strait of Hormuz, which carries roughly 51% of India's crude oil and 83% of its LPG imports.
Basmati rice exports to key Gulf and Iranian markets face disruption, with stuck shipments and falling prices domestically as export demand falters.
Textile, chemical, and engineering goods exports to West Asian markets face shipping delays due to soaring freight and war-risk insurance premiums.
The combined pressure — import cost inflation through energy and export revenue loss through trade disruption — creates a dual macroeconomic squeeze on India.
India's Energy Security and Hormuz Dependency
India imports approximately 87% of its crude oil, making it the world's third-largest oil importer. Roughly 51% of this crude, and approximately 83% of India's LPG imports, transit through Strait of Hormuz-linked shipping lanes. Any disruption at this chokepoint simultaneously inflates domestic fuel prices, raises transport costs across the economy, and pressures the current account deficit. India currently holds strategic petroleum reserves of only 5.33 MMT — enough for approximately 9.5 days — with no strategic LPG reserves at all.
The multi-sector impact on India is not coincidental — it flows directly from the structural concentration of India's trade and energy supply chains through a single chokepoint.
Basmati Rice: Trade, GI Status, and Export Markets
Basmati rice is a long-grain aromatic variety grown in the Himalayan foothills and Indo-Gangetic plains across specific Indian states (Punjab, Haryana, Uttarakhand, Himachal Pradesh, western Uttar Pradesh, Bihar, Delhi, Odisha, and parts of Jammu and Kashmir). India received a Geographical Indication (GI) tag for basmati rice in February 2016, registered by APEDA (Agricultural and Processed Food Products Export Development Authority) under the Department of Commerce. APEDA is the statutory authority for promotion and development of scheduled products including basmati rice for export. In FY2024-25, India exported approximately six million tonnes of basmati rice worth close to Rs 50,000 crore (approximately USD 5.8 billion), with around 50% of this destined for five West Asian countries: Saudi Arabia, Iran, Iraq, UAE, and Yemen.
Basmati's extreme concentration in West Asian markets means the Iran-Israel conflict directly threatens the most valuable segment of India's agricultural export basket.
India's Trade Exposure to West Asia
India's economic relationship with West Asia extends well beyond oil. The region is a major destination for Indian exports (rice, textiles, engineering goods, pharmaceuticals), a source of remittances (approximately 9 million Indian diaspora in the Gulf), and a hub for Indian shipping and logistics. Any prolonged conflict raises shipping insurance premiums, causes payment delays, and disrupts trade financing — all of which ripple through multiple sectors of the Indian economy. Rising oil prices also drive rupee depreciation (as India's import bill rises), which further inflates the cost of all other imports.
The Iran-Israel conflict is not simply an energy story for India — it simultaneously threatens one of India's largest agricultural export earners, its shipping-dependent goods exports, and its foreign exchange position through the remittance and capital account channels.
- India's crude oil import dependence: ~87%; third-largest importer globally
- Hormuz share: ~51% of India's crude, ~83% of LPG, ~56% of LNG imports
- India's basmati rice exports (FY2024-25): ~USD 5.8 billion (~Rs 50,000 crore)
- West Asia share of India's basmati exports: ~50% (5 countries)
- Iran-specific basmati imports from India: ~Rs 6,000 crore (Apr-Dec 2025)
- Basmati GI registration: February 2016 (APEDA as registered proprietor)
- Indian diaspora in Gulf region: approximately 9 million
- Estimated shipping cost increase for Hormuz routes: up to 50%
- India's SPR coverage: 5.33 MMT (~9.5 days of consumption)