Mumbai: Prolonged West Asia instability and dual chokepoint disruptions at the Strait of Hormuz and Red Sea could raise marine insurance premiums, freight costs, and transit times, impacting the profitability of Indian exporters and importers, particularly small and mid-sized firms with limited pricing power, a new report showed on Wednesday.
Around 40 per cent of India’s crude imports and a significant share of LNG and LPG supplies depend on Hormuz.
Brent crude oil peaked at $115 per barrel in May 2026 following disruptions in the Hormuz, while simultaneous disruptions in both chokepoints could push prices to $130–135 per barrel, fuelling inflation and disrupting energy supplies, according to the report by CareEdge Ratings.
The West Asia conflict has triggered an unprecedented energy shock to India since March 2026. While diversified sourcing, particularly Russian crude has helped secure oil supplies, the economic fallout is mounting.
Amid escalating tensions in West Asia, the Houthi movement in Yemen has threatened disruptions to maritime traffic at Red Sea and has reportedly carried out attacks on Saudi oil vessels.
Additionally, Iran has instructed the Houthis to prepare for the closure of the Bab-el-Mandeb Strait (Bab) in the event of United States military strikes on critical Iranian infrastructure.
The Bab-el-Mandeb Strait is the only entry point to the Red Sea from the Indian Ocean and connects to the Suez Canal, forming a vital trade route between Asia and Europe.
Combined with heightened risks of the Hormuz closing and potential disruptions in Bab, this dual-threat scenario poses a severe risk to global logistics, energy supply chains, and India’s macroeconomic stability, said the report.
Disruptions to crude oil, petroleum products, and LNG supplies could increase input costs for energy-intensive industries, while rerouting of container traffic via the Cape of Good Hope could extend delivery timelines by 2–3 weeks and raise logistics costs.
“A simultaneous closure of the Strait of Hormuz and the Red Sea, even for a few weeks, could trigger a sharp surge in global energy prices, with Brent crude potentially rising to $130–135 per barrel and LNG supplies across Asia and Europe coming under significant strain,” said Priti Agarwal, Senior Director, CareEdge Ratings.
Beyond the energy sector, such disruptions could further elevate marine insurance premiums, exacerbate port congestion, extend shipping routes and transit times, and increase freight costs across global supply chains, she mentioned.
The ongoing West Asia conflict and emerging dual chokepoint risks at the Strait of Hormuz and Red Sea may create renewed credit pressure for Indian corporates by elevating input costs, disrupting supply chains, and weakening operating cash flows, said Puneet Kansal, Director, CareEdge Ratings.
While larger companies with pricing power and diversified sourcing may absorb the shock, smaller and mid-sized enterprises with limited ability to pass on costs could face margin compression, higher working capital requirements, and liquidity stress, he noted.
(IANS)
