The Middle East is once again spiraling into instability—and this time, the economic collateral could be global. A widening conflict stretching from the Red Sea to the Strait of Hormuz threatens not only oil supplies but the very arteries of international trade. Tanker traffic is being rerouted, insurance premiums are soaring, and energy markets are edging back toward the $100 per barrel threshold.

For India, which imports over 85 percent of its crude oil, this is more than just an external crisis. It is a direct economic threat. The war has sent tremors through New Delhi’s policy establishment, forcing urgent recalibrations on everything from energy procurement and trade finance to maritime security and supply chain strategy. India now faces a critical inflection point: adapt quickly, or risk economic shockwaves that could stall growth and destabilize key export sectors.

India’s Oil Dependency Trap

India’s strategic vulnerability begins with its energy matrix. The country sources a significant portion of its crude from the Gulf, and much of it transits through chokepoints now under threat—particularly the Strait of Hormuz and the Bab el-Mandeb Strait. As global markets react to missile strikes, naval blockades, and proxy battles, Indian policymakers are confronting an urgent reality: long-term energy security cannot be built on the assumption of uninterrupted Gulf access.

New Delhi needs to aggressively pursue long-term government-to-government oil contracts, particularly with producers outside the immediate conflict zone. Diversification toward Latin American, African, and Russian suppliers must be more than rhetorical. It should involve strategic investments in upstream assets, joint ventures in refining and storage, and preferential pricing arrangements that allow Indian refiners to maintain a crude basket below the global average. Such a move wouldn’t just ensure stability at the pump—it would create a margin advantage for India’s industrial economy.

India should also take this opportunity to rethink its strategic petroleum reserves (SPR). A dynamic reserve strategy—buying aggressively during price troughs, leasing storage space abroad, and coordinating regional stockpiles—could provide meaningful insulation from future disruptions.

Exporters Caught in the Crossfire

While energy costs dominate headlines, the broader trade disruption is equally serious. Insurance costs for cargo moving through the Red Sea have doubled in recent weeks. Major shipping lines are avoiding the Suez Canal altogether, rerouting vessels around the Cape of Good Hope—adding both time and cost to Indian exports destined for Europe and North America.

This is hitting India’s small and medium exporters especially hard. Low-margin sectors such as apparel, auto components, perishables, and engineering goods are struggling to stay competitive. If the government does not act, these businesses could be priced out of global markets just as India tries to boost its share in global value chains.

One policy option would be to create a targeted export support mechanism to absorb the spike in freight and insurance costs. Modeled on past credit guarantee schemes, such a mechanism could stabilize cash flow for smaller exporters while avoiding blanket subsidies. A longer-term response would involve building out an Indian marine insurance ecosystem—currently dominated by foreign firms whose rates tend to spike in times of crisis.

Mapping Opportunity in Crisis

Geopolitical crises don’t just destroy—they also rearrange markets. As Europe, the U.S., and Southeast Asia recalibrate their supply chains away from high-risk routes, India must identify the sectors where it can step in. Pharmaceuticals, agri-processed foods, and low-cost electronics are potential winners. So are select chemicals and defense-related items. But to seize these opportunities, New Delhi needs to act fast.

The Commerce Ministry should establish a real-time export intelligence task force, working in tandem with Indian missions abroad to identify shifting demand patterns and supply bottlenecks India can exploit. Meanwhile, export promotion councils must reorient their focus toward war-resilient markets in Africa, Latin America, and East Asia.

Rerouting India’s Trade Geography

This crisis also underscores the urgency of reshaping India’s trade geography. Key corridors—such as the International North-South Transport Corridor (INSTC), which bypasses the Red Sea via Iran and Central Asia—have languished in bureaucratic limbo. Now is the moment to invest in their operational viability. Similarly, India must strengthen port infrastructure on the east coast to expand trade with ASEAN and Pacific partners, reducing reliance on western sea routes.

At home, multimodal transport and domestic logistics must evolve to ensure seamless inland movement, even when ports are disrupted. The government’s PM Gati Shakti plan should prioritize resiliency over scale in its next phase.

Strategic Policy, Not Strategic Patience

The Middle East’s volatility is not an outlier—it’s a feature of the emerging global order. India’s challenge is to anticipate these tectonic shifts and act with strategic foresight, not just tactical response. Energy security, export competitiveness, and supply chain resilience must now be treated as interlinked pillars of national power. Failing to adapt could make India a casualty of distant wars. Getting the policy mix right could turn crisis into strategic opportunity.

(The writer is a senior journalist specialising in the political economy. Views expressed are personal, He can be reached at jrchowdhury@yahoo.com)