Iran war bleeds India

Indian economy is reaching a critical point. If the simmering tensions between Israel and Iran were to continue, the geopolitical tremors would not be confined to West Asia. For India — with its deep energy ties, large diaspora in the region, growing strategic clout, and precarious economic balance — the consequences could be severe and multifaceted.
Like in Ukraine-Russia or Gaza, the line between regional and global conflict is now dangerously thin. For India, being far is no longer being safe. Along with it the visit of Field Marshal Asim Munir for a luncheon meeting with US President Donald Trump apparently to discuss how Pakistan could be a base if US decides to launch attacks on Iran adds to a new dimension. Trump, ignoring his proximity to China, said he was “honoured” to meet Munir that he discussed with the army chief situation arising out of the Israel-Iran conflict. It is being interpreted as US willingness to use Pak military bases.
Army in, Democracy Out
Never before an army chief of Pakistan has been accorded such a red-carpet welcome. Field Marshal Ayub Khan, Gen Zia-ul-Haq or Gen Parvez Musharraf were President of the country during their visits. It’s de jure recognition of Munir as the virtual head of the state and the US launchpad.
It would bring the war next to the doors of India with many stakes and likely collateral hits. Rupee has fallen to a 3-month low at 86.72 to a dollar as market is driven by optics. A prolonged conflict would lead to capital outflows from emerging markets, including India, as investors seek safe havens like gold and the dollar. This can increase further imported inflation that has touched around 31 percent putting further strain on imports and macroeconomic stability. In contrast, India’s domestic consumer inflation has dropped to 2.8 percent and wholesale 0.4 percent in May.
The Munir-Trump proximity can alter a lot many scenarios in the neighbourhood. Pakistan is always said to be available for lease and prepared to be part of the US terror mechanism. Trump has emphasised on trade with Pakistan, though he, almost hyphenating, mentions India as well. It cannot be a solace for India under a severe US pressure for tariff cut even during the Joe Biden regime. Munir’s country may not have to weather such difficulties. Each global terror acceleration, including Kargil, has benefitted Pakistan. After the World Trade Tower blasting in 2001, the US poured billions of dollars in the terror hub, Pakistan. The recent IMF aid $1.2 billion, amid Indian abstention, followed by $ 800 million Asian Development Bank and two special positions it got in the anti-terror bodies of the UN Security Council speak volumes.
Despite India projecting Pakistan as a rogue state post Pehalgam terror killings, the US is treating it as more than an ally with its army being an extended arm in the present West Asia scenario. Recent Indian shelling exposed that its nuclear arsenal belongs to the US.
An interesting development is India improving the diplomatic ties with North Korea with appointment of Aliawati Longkumer as ambassador to North Korea after four-year envoy absence. Another move has been to improve ties with the Taliban government in Afghanistan as relations deteriorates with Pakistan.
Of late, Bulgaria, Nigeria, Poland and Sweden have announced the reopening of embassies in Pyongyang.
Chabahar Dreams Dim
An immediate hit almost is the India’s investment in Iran’s Chabahar Port meant to bypass Pakistan and reach Afghanistan and Central Asia. Chabahar’s utility could diminish. It could impact Indian access to Eurasia. The Chabahar Port has seen increased traffic, handling over 60,000 TEUs of container cargo and 1.9 million metric tons of bulk/general cargo in 2023-2024.
India’s bilateral trade with Iran, through Chabahar, was $ 2.33 billion in 2022-23, with a year-on-year growth of 21.76 percent. Much of it is in thaw causing concern among exporters, including that of basmati rice.
During 2024-25, India’s basmati rice exports to Iran were valued at Rs 6,374 crores, representing 12.6 percent of India’s total basmati exports for that period. Indian transhipment at Chabahar is used for 2.5 million tonnes of wheat and 2,000 tonnes of pulses sent to Afghanistan.
India’s Skies Disrupted by Distant War
Air India stares at $600 million additional costs due to Pakistan’s airspace ban, seeks govt relief, almost Rs 307 crore a day. The Iran flare-up has heavy costs on three airlines — Air India, Air India Express and IndiGo. International flights are cancelled or have to take long detour. In 2019, a similar disruption of Iran airspace stated to have a combined Rs 37 lakh additional cost a day. The rerouting affects flights to destinations in West Asia, Europe, US, Turkey.
Air India has decided to cut 38 international flights a week and suspends Delhi-Nairobi, Amritsar-London & Goa-London routes until July 15. The losses mount now for closure of Pak and Iranian airspace.
Crude Oil Surge Stokes Capital Flight
India imports over 85 percent of its crude oil, and West Asia (especially Saudi Arabia, Iraq, and the UAE) supplies more than 60 percent of that. In the event of a war between Israel and Iran, oil prices could spike. During the 2019 US-Iran standoff after Qassem Soleimani’s killing, Brent crude surged by 5-7 percent.
Brent crude prices of have surged from around $ 60 a barrel to $ 77. The apprehension of closure of Hormuz straits has also added to shipping costs. Rising oil prices could worsen the current account deficit, push inflation, and hurt growth projections. Aviation, logistics, and fertiliser production would face cost surges. Diversifying toward the US, Russia, or Venezuela takes time and often comes with its own logistical/political baggage.
Iran, producing 3.3 million barrels per day (bpd) of crude oil, is a significant player in the urea and petrochemical supply chain. Any disruption could spike fertiliser costs, impacting sowing cycles. It could trigger food price inflation, especially in pulses and edible oils, largely imported.
Asian stock markets fell on Wednesday as the US stocks inched lower. The Indian stocks are in the red amid weak global cues.
India may be thousands of kilometres away from Tel Aviv and Tehran, but a war between the two would have a direct and immediate impact.
It would test New Delhi’s strategic autonomy, economic resilience, and diplomatic dexterity, including its ties with evolving BRICS and Quad. In a multipolar world, neutrality is no longer passive.