Mumbai, July 29: Ongoing instability in West Asia, along with potential disruptions in the Hormuz Strait and the Red Sea, could significantly affect the profitability of Indian exporters and importers. A recent report indicates that if these conditions persist, marine insurance premiums, freight costs, and transit times may increase. This situation will most adversely impact small and medium-sized businesses, which have limited capacity to raise prices in response to rising costs.
According to a report by CareEdge Ratings, approximately 40% of India’s crude oil imports, along with significant supplies of LNG and LPG, depend on the Hormuz Strait. The report noted that disruptions in Hormuz in May 2026 caused Brent crude prices to spike to $115 per barrel. If both the Hormuz and Red Sea routes face simultaneous disruptions, Brent crude could rise to $130-$135 per barrel, leading to inflation and potential energy supply interruptions.
The report highlights that the ongoing conflict in West Asia since March 2026 has created an unprecedented energy crisis for India. Although India has managed to secure its oil supply through increased purchases from Russia and diverse sources, the economic repercussions are steadily escalating.
Amid rising tensions in West Asia, the Houthi movement in Yemen has warned of potential disruptions to maritime traffic in the Red Sea and has reportedly attacked Saudi oil vessels. Additionally, Iran has allegedly instructed the Houthis to prepare to close the Bab-el-Mandeb Strait if the U.S. conducts military actions against Iranian infrastructure.
The Bab-el-Mandeb Strait is the sole maritime route from the Indian Ocean to the Red Sea and serves as a crucial trade passage connecting Asia and Europe through the Suez Canal. The report states that if both Hormuz and Bab-el-Mandeb are affected, it could severely impact global logistics, energy supply chains, and India’s overall economic stability.
Disruptions in the supply of crude oil, petroleum products, and LNG could increase production costs for energy-based industries. Furthermore, if ships are rerouted around the Cape of Good Hope, delivery times could extend by an additional 2 to 3 weeks, significantly raising transportation costs.
Priti Agarwal, Senior Director at CareEdge Ratings, stated that if both the Hormuz Strait and the Red Sea are closed for even a few weeks, global energy prices could surge sharply. In such a scenario, Brent crude could reach $130 to $135 per barrel, putting severe pressure on LNG supplies in Asia and Europe.
She added that besides the energy sector, such disruptions would lead to increased marine insurance premiums, heightened congestion at ports, longer shipping routes and durations, and rising freight costs in the global supply chain.
Puneet Kansal, Director at CareEdge Ratings, noted that the ongoing conflict in West Asia and the increasing risks associated with Hormuz and the Red Sea could impose new financial pressures on Indian companies. This would lead to higher raw material costs, disrupted supply chains, and impacts on cash flow from operations.
The report suggests that larger companies may be able to manage this shock due to their strong bargaining power and diverse supply sources. However, small and medium enterprises, which have limited ability to pass increased costs onto customers, may face challenges such as reduced profits, increased working capital needs, and cash flow crises.
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