Hormuz Disruption Threatens India's Export Pivot to Gulf as US Trade Shrank Significantly

India's Export Diversification Efforts Under Threat

India's attempts to offset losses from US tariff barriers by pivoting exports to Gulf economies are facing fresh risks due to disruptions in the Strait of Hormuz.

Key Figures:

• $7 billion: India's exports in select categories to the US between September and December 2024
• $2.1 billion: India's exports in the same categories to the US in 2025, a decline of 70%
• $854 million: India's exports in select categories to Gulf nations in 2024
• $1.7 billion: India's exports in the same categories to Gulf nations in 2025, a growth of 100%

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Export Categories Under Risk

High-value exports such as diamonds, jewellery, and engineering goods recorded strong growth in 2025, with diamond shipments increasing by 121%. Petroleum derivatives exports increased more than eightfold, while select engineering goods and metals recorded jumps ranging from five to twenty times.

Sectoral Impact

Disruptions in the Strait of Hormuz could have a ripple effect on employment-intensive industries such as gems and jewellery, metals, and machinery. The Gulf had effectively become a buffer market for Indian exporters navigating global trade disruptions.

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India's Exposure to the Region

Gulf economies account for a dominant share of export demand for a wide range of products, including:

• Agricultural commodities: 100% of shipments routed to Hormuz-linked markets
• Specialised industrial goods: Export exposure exceeding 99% to the region
• Manufacturing and consumer goods: Over 50% of non-industrial diamond exports, 60% of headphone and earphone exports, and nearly 90% of copper wire trade

Agricultural Exports at Risk

The region absorbs over 75% of India's banana and cardamom exports, leaving farmers exposed to shipping delays, higher insurance costs, and payment uncertainties if tensions persist.

Conclusion

A prolonged disruption in the Strait of Hormuz could undermine India's strategy of diversifying export markets, exposing key sectors to renewed volatility at a time when global trade conditions remain fragile.