Global Trade Faces Uncertainty As West Asia Conflict Intensifies

New Delhi, Oct 3 (KNN) The ongoing escalation of conflict in West Asia is expected to have far-reaching consequences on global trade and logistics, according to industry experts and exporters.

The intensifying tensions are likely to exacerbate already high logistics costs and adversely affect trade in key sectors such as oil, electronics, and agriculture, reported BS.

Exporters have expressed concerns that insurance costs for shipments to countries directly involved in the conflict may rise, potentially straining the working capital of Indian exporters.

The Global Trade Research Initiative (GTRI), a prominent think tank, has reported that the conflict is already impacting India's trade relations with countries like Israel, Jordan, and Lebanon.

The Federation of Indian Export Organisations (FIEO) has highlighted the potential for significant disruptions to world trade and the global economy.

FIEO Director General Ajay Sahai noted that Iran's crucial role in the oil market means any escalation could lead to supply disruptions and higher prices, with oil prices already having increased by USD 4 per barrel.

This development could have far-reaching effects on global economies, particularly those dependent on oil imports.

Sahai further warned that increased tensions could destabilise the Middle East, affecting vital trade routes such as the Strait of Hormuz, through which a substantial portion of the world's oil transits.

Such disruptions could result in higher shipping costs and delays, impacting global supply chains across various industries, from electronics to agriculture.

The potential imposition of sanctions or trade restrictions by Western nations could further complicate global trade dynamics, adding to market volatility.

S C Ralhan, Chairman, Hand Tool Association, expressed apprehension that orders to affected countries would likely be put on hold, making trade in the region increasingly risky and challenging.

Data from the first seven months of 2024 reveals significant challenges in India's trade with countries directly impacted by the conflict.

Exports to Israel declined sharply by 63.5 per cent, while Jordan experienced a 38.5 per cent decrease due to spill over effects. Lebanon also saw a 6.8 per cent reduction in trade with India.

The conflict, which began with the Israel-Hamas war in October 2023, has now expanded to include Lebanon and Syria, with indirect impacts on Jordan and Iran.

However, key regional players such as Saudi Arabia, the UAE, Kuwait, and Qatar have thus far remained uninvolved.

India's trade figures with the affected countries show significant fluctuations. Exports to Israel stood at USD 639 million during April-July of the current fiscal year, down from USD 4.52 billion in the previous fiscal year.

Similarly, exports to Iran, Jordan, and Lebanon have also seen notable changes.

Major items of export from India to West Asian countries include basmati rice, man-made yarn, fabrics, gems and jewellery, cotton yarn, and fabrics.

India holds the position of Israel's second-largest trading partner in Asia, with bilateral trade expanding beyond traditional sectors like diamonds and petroleum products to include high-tech products, communications systems, and medical equipment.

As the situation continues to evolve, the global trade community remains watchful of further developments and their potential impacts on international commerce and economic stability.

(KNN Bureau)