The Israel-Iran conflict is likely to push up shipping costs and air freight costs for Indian exporters and could also lead to supply chain disruptions, though the magnitude of the impact will only unfold over the next few days, according to Ajay Sahai, chief executive officer of the Federation of Indian Export Organisations.
Apart from a rise in freight costs and insurance premiums, exporters could also see additional pressures if fuel prices go to $100 or so, he told NDTV Profit in an interview.
"While there is no increase as of now, we will see abrupt increase in sea freight and even air freight charges if situation is not normalised," Sahai said. Currently, there's not much impact because of existing contracts, but there is some uptick in rates being seen during renegotiations. There might be further uptick in the days to come, he added.
Any disruptions in the Strait of Hormus and the Red sea, might make countries divert to Cape of Good Hope, impacting shipments to Europe and even to North America to some extent, he said.
The Strait of Hormuz, located between Oman and Iran, connects the Persian Gulf with the Gulf of Oman and the Arabian Sea. The strait is deep enough and wide enough to handle the world's largest crude oil tankers, and it is one of the world's most important oil chokepoints, according to the US Energy Administration.
Large volumes of oil flow through the strait, and very few alternative options exist to move oil out of the strait if it is closed. In 2024, oil flow through the strait averaged 20 million barrels per day, equivalent to about 20% of global petroleum liquids consumption.
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