Impact of Israel-Iran Conflict on India: Economic and Security Concerns
Ongoing Conflict Between Israel and Iran
The conflict between Israel and Iran has now entered its fifth day, with significant casualties reported. Israeli airstrikes have resulted in the deaths of a top Iranian military commander and nine nuclear scientists. Additionally, Iran's missile attacks have caused damage and loss of life in Israel. In response, Israeli Prime Minister Benjamin Netanyahu stated that the assassination of Ayatollah Khamenei would not escalate the war but rather bring it to an end.
Nuclear Concerns and Global Implications
Many Western nations, including Israel, are determined to prevent Iran from developing nuclear weapons. Reports indicate that Iran has enriched uranium to 90%, raising alarms about its nuclear ambitions. The duration of this conflict remains uncertain, but prolonged hostilities could adversely affect not only the global community but also India.
Rising Oil Prices
Iran ranks as the third-largest crude oil producer globally, and its waters account for 20% of the world's oil trade. The ongoing war has already led to a 10% increase in crude oil prices, and if the conflict continues, prices could soar to $200 per barrel. As India is the third-largest oil importer after the USA and China, rising international oil prices will inevitably impact domestic fuel costs.
Market Volatility
The Israel-Iran conflict has caused fluctuations in stock markets worldwide. With simultaneous conflicts in Ukraine and Russia, investors are hesitant to invest, leading to uncertainty in markets, including India. During such times, investors often turn to safer assets like gold, which could drive prices to record highs.
Pressure on the Indian Rupee
The increase in oil prices will inflate India's import bill, leading to a higher demand for dollars. This scenario could weaken the Indian rupee and widen the trade deficit. If the conflict persists, Indian students studying abroad may face increased expenses due to the rupee's depreciation.
Risks to Indian Migrants
Approximately 8 million Indians work in Gulf countries. Should the conflict escalate and threaten their safety and employment, India may need to undertake rescue operations for its citizens.
Potential Increase in Defense Exports
India is ramping up its production and export of defense equipment. A prolonged conflict could lead to increased demand for weapons and security devices, presenting India with opportunities in defense exports. Furthermore, India's neutral foreign policy could position it as a mediator, enhancing its global standing.
Possibility of Cheap Oil from Iran
Despite Western sanctions, if India increases its imports of cheaper oil from Iran, it could mitigate some of the financial strain, provided it is willing to navigate potential political backlash from the USA.