The long-running rivalry between Israel and Iran has descended to a regional crisis with global consequences. What started as proxy wars and strong words has now turned into a full-fledged war. How does it affect India’s interests? But before that let us understand the causes of this crisis.
A Recurring Flashpoint with Growing Global Stakes
Israel and Iran have deep ideological differences. Iran follows Shia Islamic beliefs, while Israel is built on Zionist ideas. Iran is a rising regional power while Israel wants to establish its hegemony in the region. This creates tension between them. Israel considers Iran as a threat to its very existence. This is because Iran backs armed groups such as Hezbollah in Lebanon and the Houthis in Yemen which are anti-Israel and anti-West. Let us understand this crucial dynamic.
Hamas is a Sunni group. It was founded in 1987, and stems from the Muslim Brotherhood. It governs Gaza and functions as both a political party and an armed group. Hezbollah originated in the 1980s with Iranian support. It’s a Shia Islamist group with military and political roles in Lebanon. Houthis are Shia Islamists and originated in Northern Yemen. Since 2014, they have controlled much of Yemen, including Sana’a.
Despite their sectarian differences Iran has managed to unite them as part of its Axis of Resistance. Iran leads a loose network including Hamas, Hezbollah, and the Houthis. They often act in concert, despite the absence of a formal alliance, especially during regional conflicts.
Iran funds, arms, and trains all three groups. The Iranian Revolutionary Guard Corps, especially its Quds Force, plays a major role in connecting and supporting these groups. Iran leverages them to expand its regional power and challenge rivals. This strategy simultaneously pressures Israel and its allies.
Evidence suggests coordination among these three groups during major conflicts. Hamas’ October 7th 2023 attack may have involved Hezbollah and Iran. 2023-2025 Red Sea attacks on U.S. and Israeli ships showed Houthi support for Hamas.
Israel counters Iranian backed attacks through preemptive strikes and cyberattacks. A big change happened in April 2024. Iran launched a massive attack against Israel, using over 300 drones, cruise missiles, and ballistic missiles. The attack was in response to a suspected Israeli airstrike on April 1st, targeting an Iranian consulate in Damascus; the strike killed sixteen people, among them two Iranian generals. For the first time, Iran directly attacked Israeli territory in an operation known as True Promise.
On June 13, 2025, Israel launched a major military campaign against Iran, calling it Operation Rising Lion. The strikes targeted Iran’s nuclear sites, missile infrastructure, and military leaders. Israel justified its preemptive attacks. Intelligence reports indicated Iran had bomb-grade uranium and was violating nuclear agreements. Hundreds of Israeli jets and drones attacked over 100 Iranian sites, including nuclear and military targets. Dozens of Iranians, including top military and nuclear officials, were reportedly killed. Satellite photos show attacks on Natanz, missile bases like Tabriz and Kermanshah, and power facilities.
Iran retaliated under Operation True Promise III with missiles and drones aimed at Israel. They launched over 150 ballistic missiles and 100+ drones, many intercepted by Israel’s Iron Dome, David’s Sling, and Arrow systems. The death toll for Israeli civilians has reached 24, with dozens more wounded. This marks a direct military confrontation between Israel and Iran for the first time, raising fears of a wider region‑wide war.
How the Israel-Iran Conflict Affects India
Despite distance, India remains significantly involved. It has strong ties with both Israel and Iran, but these relationships often clash with each other.
India no longer buys oil from Iran due to U.S. sanctions, but imports over 60% of its oil and gas from West Asia. After the conflict began, oil prices jumped 9–12%, reaching around $78 per barrel. If the conflict worsens and Iran blocks the Strait of Hormuz—a key route for 20–25% of the world’s oil—the price could rise to $120–130. Every $10 increase in oil can cut India’s GDP growth by 0.3% and raise inflation by 0.4%, threatening the gains made recently. The Reserve Bank may delay cutting interest rates as planned.
India trades around $400 billion every year with Europe, the US, Africa, and West Asia. This trade depends on shipping routes through the Red Sea and Strait of Hormuz. Attacks by Houthi rebels have already pushed up shipping costs by 40–60% and insurance rates by 30%. Traffic through the Red Sea is down by 42%. If things get worse, ships may have to go around Africa, adding 2–3 weeks to delivery times and increasing costs by up to 20%. Exports like tea and textiles, especially to Iran, may suffer. India exported 4.91 million kg of tea to Iran in early 2024.
Investors are moving their money to safer assets like gold, which is hitting new highs. Companies with links to Israel (like Adani Ports, Sun Pharma, Dr. Reddy’s) and industries that depend heavily on oil (aviation, auto, paint, cement) are facing losses.
The war could delay major projects like the IMEEC, which is India’s answer to China’s Belt and Road plan. The Chabahar Port in Iran—important for India’s access to Central Asia—could also be hit.
Chabahar Port: A Strategic Gateway in Jeopardy
In May 2024, India and Iran signed an important 10-year deal. This agreement gives India control over the Shahid Beheshti terminal at Chabahar the port, which is in Iran’s Sistan-Baluchistan province. India agreed to spend $120 million to improve the port and also offered a $250 million credit for future work. It gives India its only direct way to reach Afghanistan and Central Asia without going through Pakistan. It is a key part of the International North-South Transport Corridor (INSTC). This is a 7,200-kilometre trade route that connects India to Russia through Iran and the Caspian Sea.
India sees Chabahar as a way to counter China’s Belt and Road Initiative. It also helps balance the growing influence of the Chinese-backed Gwadar Port in Pakistan. Chabahar’s future is now uncertain. The growing conflict between Iran and Israel has made big projects like this more risky. Earlier, the U.S. had allowed work on Chabahar because it helped Afghanistan. But in February 2025, a new order ended that exemption. Now, Indian companies working there could face U.S. sanctions.
Shipping through nearby areas like the Strait of Hormuz and the Red Sea has already become dangerous. There are threats from sabotage, piracy, and blockades. These risks make shipping more expensive because insurance costs go up.
India also has to deal with Iran’s growing friendship with China. On March 27, 2021, China and Iran signed a 25‑year Comprehensive Strategic Partnership (aka “cooperation pact”) in Tehran. This gives China a lot of control over Iran’s trade and infrastructure. If China invests in Chabahar, India’s role could become smaller or even be replaced. As Iran’s foreign policy moves closer to China, India’s goals may suffer. India needs Iran’s support to reach Central Asia, so this shift could hurt its plans. Another bad news is the IMEEC (India-Middle East-Europe Economic Corridor), meant to rival China’s Belt and Road, is also facing problems. Though it was approved during the 2023 G20 Summit, Iran’s opposition and regional instability have slowed its progress.
Central Asia: The Prize Behind the Port
India is interested in Central Asia for both economic and strategic reasons. The region has large amounts of natural gas, oil, uranium, and rare earth minerals. It also offers new markets for Indian products like medicines, IT services, and education. But Central Asia is landlocked and has strong ties with Russia and China. India planned to fix this by using the Chabahar Port and the International North-South Transport Corridor (INSTC). Unfortunately, the Israel-Iran conflict has hurt these plans. Houthi rebels have attacked cargo ships in the Red Sea and Suez Canal. Consequently, numerous Indian vessels now circumnavigate the Cape of Good Hope. This longer route adds 12 to 18 days to the journey and increases shipping costs by 40% to 60%.
Trade with Central Asia is also falling. Meanwhile, China is increasing its presence in Central Asia. It is building railways and energy projects through its Belt and Road Initiative. India needs to act quickly to remain a strong player in the region.
Indians in the Conflict Zone
About 10,700 Indians live in Iran, mostly traders and students. Around 18,000–32,000 live in Israel. The Gulf region is home to 8–9 million Indians. After bombing intensified, Indian officials began shifting students in Iran to safer areas. A larger war might require mass evacuations.
India has issued warnings against travel to both countries. Flights are being rerouted due to airspace closures. For example, an Air India flight to London had to return after three hours. These diversions are adding to travel time and costs.
Conclusion
The Israel-Iran war is shaking up India’s economy, energy security, and regional diplomacy. Rising oil prices, stock market drops, trade delays, and the risk to Indians abroad are immediate concerns. Projects like Chabahar Port and the IMEEC are at risk, while India’s neutral position is getting harder to maintain. Some relief comes from Gulf nations staying neutral and India’s financial strength—but if the war continues, the impact could be severe.
India should build stronger energy and trade ties with stable Gulf countries like Saudi Arabia and the UAE. These countries already supply a lot of India’s oil and invest heavily in India.
India should also invest more in its naval and cyber security. Because shipping costs have gone up sharply, India needs to build more of its own cargo ships. It should also boost its sea patrols in the Arabian Sea and nearby areas. Working closely with navies from France, the U.S., and the UAE would help.
The future is uncertain, the global turmoil is only getting worse. India needs to recalibrate its diplomatic, economic and geopolitical priorities. For this a visionary leadership is imperative.
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