Middle East conflict: Exporters fear rise in logistics, insurance costs, impact on shipments

New Delhi, Feb 28 (PTI) With a joint attack by the US and Israel on Iran triggering a massive military confrontation in the Middle East, Indian exporters on Saturday said the development is expected to push transportation and insurance costs up, potentially disrupting the outbound shipments to the US and Europe.

They said that any prolonged tensions in the region could impact oil prices and that will have implications on input costs and current stability.

Following the attack by the United States and Israel, Iran launched retaliatory military strikes targeting several American military bases in the Middle East, including in Qatar, Kuwait and the United Arab Emirates (UAE).

Federation of Indian Export Organisations (FIEO) President SC Ralhan said the ongoing conflict has already begun to disrupt established global logistics channels.

“Air routes are being altered, and maritime trade through the Red Sea and key Gulf straits faces heightened uncertainty. If diversions become prolonged, shipments may increasingly have to reroute via the Cape of Good Hope, adding an estimated 15–20 days to transit time for Europe and the United States,” Ralhan said.

In addition, he said, heightened geopolitical risk typically results in higher marine insurance premiums, further adding to transaction costs for exporters.

“A prolonged disruption could also exert upward pressure on global energy prices, with consequential implications for input costs and currency stability, including pressure on the Rupee,” Ralhan said.

While Indian exporters have demonstrated resilience in navigating past disruptions, sustained instability in these critical trade corridors would warrant close monitoring and calibrated policy support to maintain competitiveness, he said.

Sharing similar views, Apparel Export Promotion Council Chairman A Sakthivel said: “We are worried that our shipment may get delayed due to this tension. We may have to take long routes to send our goods to Europe, USA and other western countries”.

As a joint attack by the US and Israel on Iran triggered a massive military confrontation in the Middle East, India on Saturday urged all sides to exercise restraint and avoid escalation, asserting that the sovereignty and territorial integrity of all countries must be respected.

In 2024, the tensions in the Middle East region following the Israel-Hamas war had impacted the transportation of India through the Red Sea route, as shippers had to take longer routes to reach destinations in the US and Europe.

An exporter from the leather sector said, “We may face similar problems now if the war continues for long”.

The Red Sea crisis last time began in a major way on October 19, 2023, when the Iran-backed Houthis in Yemen launched attacks on civilian-operated cargo ships near the Yemeni coast. PTI RR MR