Escalating geopolitical tensions between Israel and Iran have started to significantly impact global trade routes, with Indian exporters reporting a 20% spike in logistics costs as shipping lines reroute vessels to avoid the conflict zone.
Why Are Costs Rising?
- Rerouting Ships: Major cargo lines are avoiding the Red Sea and Strait of Hormuz, opting for longer routes via the Cape of Good Hope.
- Insurance Premiums: War risk surcharges and marine insurance premiums have risen sharply.
- Container Shortages: Increased transit times are leading to container imbalances and delays.
Impact on Indian Trade
- Export Delays: Sectors like textiles, auto parts, and pharmaceuticals are facing longer delivery cycles.
- Cost Pressures: MSMEs are particularly vulnerable, with tighter margins and higher freight costs.
- Global Competitiveness: Indian goods risk becoming less competitive in price-sensitive markets.
Government and Industry Response
- The Ministry of Commerce is in talks with logistics firms to seek temporary subsidies or support.
- Export bodies like FIEO have urged for faster port clearance and relief on port charges.
What’s Next?
If the Israel-Iran conflict escalates, more global supply chains may be disrupted. Indian exporters are bracing for continued volatility through the second half of 2025.
Conclusion
The rise in Indian exporters logistics cost due to Middle East tensions is a stark reminder of how geopolitical shifts directly affect trade dynamics. Businesses and policymakers alike must prepare for prolonged global uncertainty.
