Iran-Israel conflicts and tension: Impact on both Indian Exporters and Global Supply Chain

The recent capture of the MSC Aries by Iranian forces has raised fears of further disruptions leading to soaring freight costs. The latest escalation can be traced back to an attack in Damascus, which heightened the existing geopolitical tensions between Iran and Israel. Iranian forces seized the MSC Aries, a 14,000-teu vessel operating on MSC’s India-Europe service, adding fuel to the fire and intensifying concerns about supply chain disruptions.

Indian exporters, who had recently experienced some relief from the Red Sea shipping crisis, are now grappling with the prospect of increased freight costs and cargo flow disruptions. The capture of the MSC Aries has raised cargo insurance premiums due to heightened risks, while carriers may impose surcharges to mitigate operating challenges.

 Some carriers on India-Middle East routes have announced rate increases to capitalize on improving demand, and concerns persist among exporters. Despite the challenges, India’s export industry showed resilience in fiscal year 2023-24, with trade volumes remaining relatively stable compared to the previous year. The government’s push for local manufacturing aims to further boost exports, with the potential entry of global players like Tesla signaling positive growth prospects.

As tensions between Iran and Israel continue to escalate, Indian exporters are navigating a complex landscape fraught with uncertainties in supply chain. The need for stability in the supply chain and concerted efforts to address geopolitical challenges is paramount to safeguarding trade interests and ensuring sustainable growth in the export sector.