In an era of multipolarity, complex interdependence is the desirable path towards multifaceted interconnectedness. In the era of interdependence, Robert Keohane and Joseph Nye have argued that the very nature of international relations has altered to become more symbiotic in all respects, particularly with economics. Conflicts, wars, political strains, sanctions, and territorial clashes often upset trade channels and logistics networks, creating volatile global markets. In the current scenario of global geopolitical conflicts, significant repercussions have troubled international trade and global supply chains. Almost three months back when the war agaisnt Iran (Operation Epic Fury) began, many including the West expected the war to last only for a short span, much opposed to the present picture.

Disrupted trade routes, broken global supply chains, and capital flight prompted by conflict reverberate across neutral economies — often before a single shot crosses their border. Third-party nations — those neither formally at war nor directly targeted — suffer measurable political, economic, and institutional undulation effects that reshape their developmental courses. For India, the present situation resonates such a crisis impacting the developmental trajectory.

India's Achilles' Heel

Being a energy-deficit nation, over 80 per cent of its oil imports come primarily from Kuwait, Qatar, Saudi Arabia, and the UAE, which passes through the Strait of Hormuz — nearly 90 per cent of India’s LPG imports pass. The closure of the Strait of Hormuz has extensively disrupted global energy markets, choking off nearly 20 per cent of global oil supplies and crucial LNG volumes — 90 per cent of India’s LNG and 30 per cent of crude oil imports pass through Hormuz.

Consequently, when oil supply shortage hit India, the government curtailed its distribution for commercial use to factories and businesses (restaurants and food businesses), leading to decline in shares of food-delivery companies like Swiggy. The food delivery platforms contribute significantly to the country’s GDP — between 2021–22 and 2023–24, the output and Gross Value Added (GVA) of this sector increased at a Compound Annual Growth Rate (CAGR) of over 16-17 per cent. Besides, textile sector and MSME manufacturing in India has also been facing severe implications of the LPG shortage.

According to a research by the SBI, rise in crude prices by USD 10 per barrel amplifies India's current account deficit by 35 basis points while soaring inflation by 35-40 basis points, with a 20-25 basis point drag on the progress of GDP. With the current crude oil prices (May 2026) sticking around USD 100-105/barrel, India's GDP rate for FY27 has now dipped to approximately 6.6 per cent. According to India’s Defence Ministry, consumers have been protected so far by keeping prices of petrol and diesel at a stable rate, but at an enormous cost of oil marketing companies absorbing losses of close to INR 1,000 crore a day, with under-recoveries reaching almost INR 2 lakh crore in the first quarter of 2026.

Fractured Supply-Chain Crisis

The conflict in Iran has severely affected global logistics and supply chain management, and for the Indian economy it has been a huge setback given India’s economic aspirations for the years ahead. The soaring oil prices is cascading through pharmaceutical supply chains — raising costs for chemical solvents, Active Pharmaceutical Ingredients (APIs), raw materials, packaging, and logistics — ultimately making even basic medicines more expensive to produce. Health experts and scientists have cautiously underlined that in case of continuing supply chain interruption, the pharma sector, especially production is probably going to be hard hit, resulting in mounting prices or even global scarcities. India’s deep dependence on imported APIs has been straining its healthcare manufacturing sector. More than 60-70 per cent of India's API requirements are sourced from China through West Asian trade routes.

India’s pharma export market has been affected as India supplies medicines to more than 200 countries. Supply chain interruption not only hurts Indian producers but also creates medicine scarcity in the US, UK, and African markets that highly depend on Indian generics. From the logistics end, re-routing of cargo away from conflict-ridden corridors such as the Red Sea and Strait of Hormuz has increased freight insurance premiums, distressing Indian exporters who function on lean cost structures.

Besides the pharma industry, other sectors such as petrochemicals and plastic, fertilizers, electronics and manufacturing, automotive and transportation, consumer goods and aviation industry has also been severely hit by the current West Asian crisis. There has been a surge of over 1000 per cent in marine insurance premiums and all major container carriers like CMA CGM, Maersk, MSC, Hapag-Lloyd have suspended Gulf transits, crippling the supply chain. Re-routing have forced many carriers to detour through a longer and secure route around the Cape of Good Hope, adding up more transit time and straining logistics capacity. Petrochemical feedstock, including ethylene and propylene, is primarily sourced from the Middle East, and this crisis has caused a ‘plastic shock’, impacting the production and snowballing manufacturing costs for plastics, packaging, and associated materials.

Price of styrene used in paints shot up from INR 90-110 per litre to INR 120-125 per litre, fabric cost have increased by 12 per cent to 15 per cent, and price of yarn has climbed by 15 per cent to 18 per cent. The impact on the aviation sector has triggered rise in airfares, weekly losses of estimated USD 1.75 billion to USD 8.75 billion as a result of mounting aviation fuel prices (up to 40 per cent higher) and airspace closures in the Middle East.

Remittance under Risk

A survey by Reserve Bank of India (RBI) in 2025 suggests that remittances to India are probably to remain high and are estimated to rise to nearly USD 160 billion in 2029. India is, in fact, the largest recipient of remittances globally, and for many years now, Gulf remittances (38 per cent in 2023-24) have become a major financial support for Indian households. Remittances remain a steady variable in the India macro economics and therefore, the geopolitical tension in West Asia holds negative impact due to the uncertainty and safety concerns. The war is impacting on employment and incomes of the diaspora, consequently impacting the remittances, which contribute around 3.5 per cent to India’s GDP as of 2025-26.

The longer the war and energy supply disruption continue, there will be shrinking labour demand, workers in construction and infrastructure may face unpaid wages as projects could slow down or stall, and employers could struggle to pay staff on time as government funding dries up or gets redirected. Remittances are a crucial factor that drive domestic consumption along with the stability of external sector and are an important shield in an otherwise unstable global economic situation. Hence, a long-drawn crisis will hollow remittances, hitting an important part of external resilience.

Uncertain Chabahar Ambitions

The Chabahar Port has been a centrepiece of India’s regional strategic hopes of developing a trade and transit passage with landlocked Central Asia and Afghanistan. India has invested about USD 120 million for operating the Shahid Beheshti terminal in southeastern Iran. As India’s arch rival Pakistan stands in between Central Asia and Afghanistan, Chabahar allows India to dodge that issue by means of a maritime path. With the crisis in West Asia, India's long-dreamt Chabahar project is now at a very precarious crossroad, wedged between US sanctions, an active conflict, and hard diplomatic picks.

Now that the deadline of April 2026 set by the US by revoking its sanctions in September 2025 has passed, India’s Chabahar dream becomes uncertain. India is left with no choice but to wait for the war to end and also the heavy sanctions on Iran to end, so that it can be in a position to calculate the strategic future of Chabahar. For India, the likely way out from this quagmire comes with an option of provisionally shifting its stake in Chabahar to Iranian entities, saving the option to re-enter if and when the sanctions ease in the forthcoming times. Chabahar connects India to Iran, Russia, and Central Asia; hence, this major project slipping out of New Delhi’s hands weakens its entire Eurasian connectivity plan. Also, Chabahar’s strategic importance to counter Chinese Gwadar Port in Pakistan would be lost if the project does not materialize. Therefore, at this point Chabahar appears to be an USD 120 million liability that once projected to be India's boldest strategic bet.

Strategic Autonomy Under Challenge

India is caught in a geopolitical quagmire. Its strategic autonomy is undergoing a real trial — on one hand, there is a tactical stronger security and technology cooperation with the US and Israel, and on the other India has to protect historic ties with Iran, which remain vital for energy diversification, Chabahar port access, and regional connectivity. India strategic autonomy marks the way to not take sides but carry out quiet diplomacy to defend energy flows, trade continuity, and diaspora security. New Delhi understands the importance of actively trying to balance its strategic ties with the US, Israel, and Iran while tackling the massive domestic fuel shudders and safeguarding its overseas diaspora.

The recent announcement by Prime Minister Narendra Modi suggesting few restrictive expenditure patterns such as avoiding foreign travel or shifting to work from home model indicates that the government is grappling hard to swim through these difficult times. The Indian government has been expanding its oil sources as well as recommending higher biofuel fusions to marginally cushion the shock.

A report by the Institute for Energy Economics and Financial Analysis states that blending 20 per cent ethanol has led to a 2.5 per cent decline in crude oil imports for India in 2025. However, the same report also argues that while any reduction of oil import is helpful, the fast-paced fuel blending indicates policy ambiguity leading to further confusion among automobile producers.

The bottom line of this West Asian crisis for India is that no country can  remain a bystander in a conflict. Each day the war sustains, its costs are socialized across the world through trade, migration, energy, and institutional channels — making third-party nation face the economic impact not as an exception, but as a structural aspect of the international system.

(The author is a Doctoral Research Candidate in International Relations at Jadavpur University, Kolkata, India. Views expressed are personal. She can be reached at anujasaha.ju@gmail.com)