US-Iran war: Amid soaring crude oil prices due to rising tensions in the Middle East, the Indian economy has not just the task of containing inflation, but also ensuring the safety of its trade at the Chabahar Port and the ₹15,000 crore bilateral trade that New Delhi and Tehran have. The Indian government has already made $120 million financial commitment to Iran. The US sanctions waiver for India to operate from the Chabhar Port expires on 26 April 2026, an uncomfortably narrow window for New Delhi to recalibrate. Apart from this, the two nations had a bilateral trade to the tune of over ₹15,000 crore, which is lying in limbo due to the joint military attack of Israel and the US on Iran.
What does a US-Iran war mean for India?
Speaking on the impact of the US-Iran war on India, Nitant Darekar, Research Analyst at Bonanza, said, “For India Inc., the US-Iran war is not just a diplomatic headache; it’s a structural risk to connectivity assets, export pipelines, and regional influence. We flag this as a high-severity geopolitical overhang on India’s trade and infrastructure outlook.”
The Bonanza expert said the escalating US-Iran conflict has put India’s hard-won strategic bet — the Shahid Beheshti terminal at Chabahar — in serious jeopardy. India has already transferred its full ~$120 million financial commitment to Iran and is currently operating under a six-month conditional US sanctions waiver valid only until April 26, 2026, TRT World — leaving New Delhi with an uncomfortably narrow window to recalibrate.
Strait of Hormuz in focus
Nitant Darekar of Bonanza said that Iran’s blocking of the Strait of Hormuz has already pushed crude prices and any further escalation risks choking cargo flows across the INSTC corridor, which India depends on to bypass Pakistan. Bilateral trade — spanning basmati rice, tea, apparel, and engineering goods — is facing direct disruption, with basmati prices already slipping by ₹4–5/kg per day.
Can India offset losses via Russian oil imports?
Speaking on India’s Russian oil imports, Aamir Makda, Commodity & Currency Analyst at Choice Broking, said that India imports nearly 2.80 mbpd from the Middle East and approx 1.10 mbpd from Russia. Russia has scaled its exports to India to record levels, with over 24 million barrels currently floating in the Arabian Sea as a strategic buffer. However, even at maximum capacity, Russia can likely only cover about 40–50% of the volume lost if the Persian Gulf is completely cut off. The feasibility of Indian refiners purchasing Russian oil has been influenced by two factors: a US Treasury waiver allowing such purchases and alternative transport routes via the Suez Canal and the Red Sea.
“India faces three critical challenges: the LPG crisis due to reliance on Gulf imports without strategic reserves, the need for technical adjustments in refineries to handle Russian crude, and limited Strategic Petroleum Reserves providing only 9.5 days of cover, highlighting a potential fuel shortage risk if the Hormuz blockade persists,” Aamir Makda of Choice Broking said.
“For India Inc., the US-Iran war is not just a diplomatic headache; it’s a structural risk to connectivity assets, export pipelines, and regional influence. We flag this as a high-severity geopolitical overhang on India’s trade and infrastructure outlook,” said Nitant Darekar, Research Analyst at Bonanza.
According to Kpler’s data, there are 130 million barrels of Russian crude at sea. There are about 27 million barrels of Russian crude on tankers in the Arabian Sea and the Bay of Bengal, while vessels carrying another 7 million barrels are idling near Singapore. Furthermore, approximately 20 million barrels are in the Suez Canal and the Red Sea.
In terms of volumes, India imported about 2.5 million barrels per day from the Strait of Hormuz in February. Therefore, in terms of volume, Russian barrels will offset the crude imported from the Strait of Hormuz over the next month.
Highlighting the catch in India’s Russian oil imports, Dhaval Popat, Energy Analyst at Choice Institutional Equities, said, “These Urals are being sold to Indian refiners at a premium of USD2 to 4/b to Brent, while the barrels from Strait of Hormuz, which India received from Saudi Arabia, Kuwait and Iraq were either at a discount or closer to Brent. The barrels from the UAE were only available at a premium. Hence, the volume from Russian barrels will serve as a safety valve for the current situation. However, it would hurt the margins to a certain extent given the premium.”
How to sustain ₹15,000 crore bilateral trade?
Avinash Gorakshkar, a SEBI-registered fundamental equity analyst, said that bilateral trade between India and Iran totalled $1.68 million (around ₹15,000 crore), of which India exported $1.24 million worth of basmati rice, tea, sugar, and pharmaceutical products. Of this export, around two-thirds of India’s exports to India are dominated by basmati rice.
“The balance of trade between India and Iran is in favour of India. After the US and Israel attack on Iran, US President Donald Trump has hinted at levying a 25% additional reciprocal tariff on those countries that deal with Iran. So, it’s high time for New Delhi to find a replacement for Tehran to ensure the safety of its ₹15,000 crore bilateral trade relation.”
Disclaimer: This story is for educational purposes only. The views and recommendations above are those of individual analysts or broking companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
