Iran-US Conflict Puts Nearly $5 Billion of India’s Hormuz Exports at Risk

India’s Hormuz Export: India's exports to Bahrain, Kuwait, Iran, Iraq, Qatar, Saudi Arabia and UAE came under pressure in the first quarter of FY27, as nearly $5 billion, or more than 43% of exports to these countries, recorded a decline. 

The data highlights the growing trade risk for Indian exporters amid Iran-US conflict and continuing disruption in West Asia.

India's total exports to the 7 countries fell 16.9% to $11.4 billion in the June quarter from $13.7 billion a year earlier. This decline came even as India's overall exports increased to $129.5 billion from $111.5 billion during the same period.

Nearly Half of Export Commodities to Hormuz Markets Decline

The weakness becomes clearer when individual commodity lines are considered.

Of 815 commodity lines with exports above $1 million, 466 recorded a year-on-year decline in exports to the seven Hormuz economies during Q1 FY27. This compares with 326 declining commodity lines in the year-ago period.

The value of these declining exports fell to $4.99 billion from $8.31 billion, a decline of around 40%.

Why Could $3.1 Billion of Exports Be Harder to Replace?

The bigger concern is that some commodities are also seeing weaker demand globally.

Around 259 commodities, worth $3.15 billion in exports to the seven economies, also recorded a decline in India's exports to other countries. This accounts for nearly two-thirds of the value of exports that fell in the seven West Asian markets.

For these products, exporters may find it harder to offset weak demand in the Hormuz region by shifting shipments to other markets.

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Diamonds, Jewellery and Rice Under Pressure

Several major export categories have already shown weakness.

India's diamond exports to the seven countries declined by around $115 million, while overall diamond exports fell by roughly $140 million. 

Gold jewellery exports to the Hormuz economies declined by around $224 million, compared with a $169-million decline in India's overall exports. 

Rice exports also came under pressure. Parboiled rice shipments to the seven economies declined by around $335 million, while India's overall exports of the commodity fell by around $241 million.

Parboiled basmati rice exports to the Hormuz markets fell 55% to $270.6 million from $605.9 million. India's overall exports of the category declined 27% to $669.5 million from $910.4 million.

Some Exporters are Finding Alternative Markets

The impact has not been uniform across commodities. Some exporters have been able to compensate for weaker demand from the region by increasing shipments to other markets.

Aluminium wire exports to the seven countries fell 95.5%, but India's overall exports of the commodity increased 41.7%.

A similar trend was visible in selected petroleum and metals products. Motor gasoline exports to the Hormuz region declined 42.4%, while overall Indian exports rose 30.8%. Aviation turbine fuel exports to the region fell 56.5%, even as overall exports increased 44.7%.

Ferro-silico-manganese exports to the seven countries declined 30.9%, while India's overall exports increased 44.9%.

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Conclusion: What Does This Mean for India's Export Sector?

The trade impact of the West Asian disruption will depend heavily on whether Indian exporters can find alternative markets. Commodities where global exports are still growing may be able to absorb weaker Hormuz demand. 

However, the $3.1 billion basket where exports are declining both in the region and globally faces a more difficult environment, increasing the risk that lost Hormuz trade cannot be easily replaced.