Iran-Israel war may increase sea transportation cost once again

16-Jun-2025 04:25 PM

Mumbai. The ongoing conflict between Iran and Israel is expected to significantly impact global trade dynamics, especially if the war in West Asia continues for an extended period.

One of the major concerns is the potential disruption of the Strait of Hormuz—a critical maritime chokepoint through which nearly 25 percent of the world’s petroleum trade passes. Iran has warned of a possible closure of this vital route.

For India, the immediate consequence would be a rise in sea transportation and insurance costs. According to the Director General of the Federation of Indian Exporters Organization (FIEO), while maritime traffic in the Red Sea region had recently started returning to normal and freight and insurance rates had stabilized, the new conflict could reverse these gains.

Cargo ships had resumed using the Red Sea route, which saves 15–20 days in transit time for vessels travelling from India and Asia to Europe and the Americas.

However, the resurgence of Yemen’s Houthi rebels—who are aligned with Iran—adds a new layer of threat. The group has resumed missile attacks on Israel and is expected to target commercial ships transiting the Red Sea.

This could make the Red Sea and Suez Canal route unsafe, forcing vessels to take the much longer route around the southern tip of Africa, thereby increasing journey times and operational costs.

The Chairman of the Engineering Export Promotion Council noted that while the Red Sea waterway has not yet been closed, the situation remains volatile.

So far, shipping companies have not officially revised freight charges, providing temporary relief to Indian exporters. Nonetheless, they remain concerned that any escalation in the conflict could quickly change the scenario and significantly raise transportation costs in the coming weeks.