US-Iran Conflict: Potential Ramifications on India's Strategic Interests in Chabahar Port and Bilateral Trade Worth ₹15,000 Crore

US-Iran War Threatens India's Trade and Economy

The escalating US-Iran conflict is putting India's economy at risk, with soaring crude oil prices and potential disruptions to trade at the Chabahar Port. ₹15,000 crore in bilateral trade between India and Iran is hanging in the balance, with the US sanctions waiver for India to operate from the Chabahar Port set to expire on 26 April 2026.

India's Vulnerability to Oil Price Volatility

India's economy is heavily reliant on imported oil, with 2.80 million barrels per day coming from the Middle East. However, with the Strait of Hormuz in focus, India's oil imports from the region are at risk. Aamir Makda, Commodity & Currency Analyst at Choice Broking, notes that even at maximum capacity, Russia can only cover about 40-50% of the volume lost if the Persian Gulf is completely cut off.

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Russian Oil Imports Offer Temporary Relief

India has increased its imports of Russian oil, with 24 million barrels currently floating in the Arabian Sea as a strategic buffer. However, the feasibility of Indian refiners purchasing Russian oil is influenced by two factors: a US Treasury waiver allowing such purchases and alternative transport routes via the Suez Canal and the Red Sea.

Challenges Ahead

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.

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Bilateral Trade at Risk

The balance of trade between India and Iran is in favour of India, with ₹15,000 crore in bilateral trade at stake. Avinash Gorakshkar, a SEBI-registered fundamental equity analyst, notes that India exported $1.24 million worth of basmati rice, tea, sugar, and pharmaceutical products to Iran, with basmati rice dominating two-thirds of India's exports.

Recommendations

To sustain its bilateral trade with Iran, India needs to find a replacement for Tehran to ensure the safety of its ₹15,000 crore bilateral trade relation. With the US sanctions waiver set to expire on 26 April 2026, India must act quickly to recalibrate its trade strategy and mitigate the risks associated with the US-Iran conflict.