Shifting Landscape in the Gulf Region and Its Impact on India

Summary

The US-Israel and Iran conflict, and disruptions in the Strait of Hormuz threaten India's energy and trade security. Heavily dependent on Gulf imports, Prime Minister Modi's visit to the UAE is a strategic move to secure vital oil and gas supplies until regional hostilities subside.

Amidst the turmoil in the Middle-East, the visit of Prime Minister Narendra Modi to UAE signals the importance of the region for India's security and trade interests. The Gulf region continues to be a critical component of the global energy system. The Strait of Hormuz, a narrow shipping lane, is the focal point of the region. It carries approximately 20 million barrels of oil per day, which accounts for approximately one-fifth of the world's petroleum consumption.

The Conflict in the Middle-East

The region has been in discussion since October 2023 with Hamas's strike on Israel. Thereafter, Israel started a military campaign across the region – ultimately leading to a large-scale military campaign launched on 28 February 2026 under the name – Operation Roaring Lion. It refers to a major military conflict involving US and Israeli air strikes against Iran, aimed at destroying its nuclear capabilities and regional influence.

In retaliation to US-Israel airstrikes, Iran mobilised its plan by attacking the neighboring Gulf States. The Iranian strategy was to escalate the fight and increase the umbrella impact of the conflict across the region. Meanwhile, the closure of Strait of Hormuz by Iran and counter-blockade by the USA has disturbed maritime energy supplies, trade and food security with rolling effects on the world economy. Now the conflict in the gulf region resembles a new cold war.

The recent visit of President Donald Trump to China was perceived as bringing some relief, but any official statement from either side is still awaited. So, the upcoming weeks and months will be critical as the impact of the war is being faced by the world. In the words of Mahdi Ghuloom, the conflict and its impact on the gulf region have disturbed the region's "Oasis Model" and threw its foreign policy into short term economic recovery and tough security imperatives. The conflict in this region exposed vulnerabilities across the region specifically in expatriate confidence, tourism, defense and trade. Although Gulf States are giving importance to domestic stabilisation, alternative trade routes and deeper co-operation with the USA and its allies.

Experts like Mannat Jaspal and Reem Sagahyyroon argue that the crisis in the Strait of Hormuz is one of the world's most severe energy shocks which has disrupted more than 13 million barrels per day of supply and exposed the global energy system. Although prices remain temporarily contained, because of the stockpiling, alternative trade routes, and strategic reserves, the ceasefire offers limited relief, but it is difficult to limit the impact of the crisis in the region and beyond. The economic consequences of Middle East tensions are more pronounced through increased volatility and uncertainty in global energy markets than through outright supply disruptions. These effects are quickly transmitted to developing economies, where they amplify vulnerabilities that were already present as a result of earlier shocks such as the war in Ukraine.

Impact on India

India's LPG supply has been hampered by the war in Iran, resulting in a direct impact on both domestic and commercial kitchens, and businesses. Due to its heavy reliance on Gulf oil, LNG, and fertiliser imports, India's trade, fertiliser supply, and energy security are all at risk from the US-Israel-Iran conflict. India has been impacted by the US-Israel-Iran conflict in a number of ways. Since New Delhi imports 88 per cent and 91 per cent of its oil and LPG respectively from the Gulf. The increase in crude oil prices to $120 per barrel will have a direct impact on the pockets of India's population.

India's trade has been hampered; as there are currently about 400,000 tonnes of Indian Basmati rice stuck at ports or are in transit. Vessel insurance and shipping costs have abruptly increased, making Indian exports less competitive globally. Rising input costs are predicted to reduce margins for industries like aviation, logistics, agriculture, and paints. Global trade practices and India's imports into the Gulf have been significantly impacted by this.

Conclusion

India continues to maintain close ties with both sides in the conflict. For now, New Delhi has called on leaders across the board to pursue a peaceful resolution. Meanwhile, India continues to secure its energy imports from Iran and the UAE; Prime Minister Modi's recent visit to UAE has further solidified the potential for a steady supply of crude oil and gas until a final agreement is reached between the US and Iran.

Disclaimer: Views expressed are of the author(s) and do not necessarily reflect the views of The Statecraft Institute.