India’s $57B Gulf Export Corridor Braces for Impact as War Risks Spike Shipping and Insurance

India’s export sector is facing its most significant geopolitical disruption since the global supply chain shocks of 2022, as tensions in West Asia ripple across shipping lanes and trade corridors.

With the strategic maritime route around the Strait of Hormuz effectively emerging as a high-risk transit zone for nearly two weeks, exporters say the disruption is beginning to affect the broader $56.9 billion annual export corridor between India and Gulf Cooperation Council (GCC) countries. While much of the global focus has been on oil flows, the impact is now spreading across labour-intensive export sectors ranging from engineering goods and jewellery to textiles and agricultural products.

The Gulf remains one of India’s most critical export destinations, with the United Arab Emirates and Saudi Arabia ranking among India’s top trading partners.

Deep Trade Links Amplify the Risk

Economists say India’s economic relationship with the Gulf is both large and structurally concentrated, which amplifies the impact of disruptions. Prof. Jaydeep Mukherjee, Professor of Economics at Great Lakes Institute of Management, Chennai, said, “India’s economic linkages with GCC —particularly the UAE and Saudi Arabia —are deep and asymmetric. In 2024-25, India exported about $56.9 billion worth of goods to the GCC, while imports (mainly crude oil and LNG) were roughly $121.7 billion. The export basket to the Gulf is heavily concentrated in labour-intensive sectors, mostly gems and jewellery, textiles and apparels, and food. For example, gems and jewellery alone accounted for around $7.75 billion of India’s exports to the UAE, making it one of the most concentrated trade relationships India has globally. Food exports are also significant: Saudi Arabia alone imported $1.2 billion of Indian basmati rice in 2024-25, making it the single largest market.”

These export categories rely heavily on predictable shipping schedules and tight delivery timelines, making them particularly vulnerable to logistical disruptions.

Four Key Sectors Carry the Bulk of the Risk

Trade data from India’s commerce department suggests that several export segments are now in the immediate risk zone.

Engineering goods represent the largest share of India’s exports to the GCC, with shipments estimated at more than $12.5 billion annually. These include industrial machinery, electrical equipment, construction materials and heavy engineering components. The gems and jewellery sector, another major contributor, exports goods worth around $9–10 billion annually to Gulf markets, driven by strong consumer demand in the UAE’s retail jewellery hubs. Agricultural and food exports, including basmati rice, fruits and processed food, are valued at over $8 billion, with Saudi Arabia remaining one of the largest buyers of Indian rice. Textiles and apparel exports, worth roughly $4–5 billion annually, also depend heavily on the Gulf retail market and wholesale garment trade.

Together, these sectors account for a significant share of India’s labour-intensive exports, meaning disruptions could affect both exporters and employment in manufacturing clusters across the country.

One of the earliest impacts of the disruption has been a sharp rise in shipping costs and insurance premiums for cargo passing through the Gulf.

Mukherjee noted, “Recent disruptions have already pushed freight surcharges to $4,000–$8,000 per shipment, doubling logistics costs in some sectors. For labour-intensive exports where margins are often 5–8%, even small freight increases can erase competitiveness. If oil prices rise towards $100 per barrel while logistics disruptions cut labour-intensive exports by even 15–20%, the India-GCC trade deficit could widen significantly.”

Such cost pressures can quickly make Indian exports less competitive compared with goods from other manufacturing hubs.

Corporate Exposure Also Under Watch

The Gulf is an export destination for goods and also a major revenue generator for several large Indian companies. Engineering and infrastructure firms such as Larsen & Toubro derive a significant share of their international order books from the Middle East, particularly large infrastructure and energy projects in Saudi Arabia and the UAE. Similarly, IT services companies like Tata Consultancy Services maintain extensive operations across the Middle East and Africa region, supporting digital transformation and enterprise technology deployments.

Retail-focused firms such as Kalyan Jewellers also have a large physical presence in Gulf markets, where demand is closely tied to consumer spending and tourism flows.

Prolonged disruptions to travel, logistics or economic activity in the region could eventually affect project execution timelines and consumer demand.

Supply Chain Ripple Effects Across Industries

Beyond traditional export sectors, the geopolitical tensions are also influencing global manufacturing supply chains.

Satendra Shukla, Chief Business Officer at Maxvolt Energy Industries Pvt Ltd, said, “The ongoing geopolitical tensions involving Iran are creating ripple effects across global energy and logistics networks, which inevitably influence the battery supply chain. For Indian battery manufacturers, the biggest concern is not a direct supply disruption but the indirect impact on shipping routes, energy prices, and raw-material costs. Many of the critical battery materials, such as lithium, move through complex international trade routes before reaching manufacturing hubs in Asia. Any instability around key transit corridors increases freight costs, insurance premiums, and delivery timelines. This can place additional pressure on manufacturers who rely on predictable supply chains to meet growing demand from the electric vehicle sector." He further added, "Another important factor is the rise in global energy prices during periods of geopolitical conflict. Battery manufacturing and material refining are energy-intensive processes, and higher energy costs can translate into increased production expenses across the industry. However, this situation also highlights the importance of strengthening domestic supply chains and investing in local battery manufacturing capabilities. India has a strong opportunity to build resilient ecosystems for advanced battery technologies, reducing long-term exposure to global geopolitical disruptions while supporting the country’s rapidly expanding EV market.”

Textile Exporters Warn of Competitive Pressure

Textile exporters say shipping disruptions could allow competing manufacturing nations to temporarily gain ground in Gulf markets.

Ajay Ajmera, Founder and CEO of Ajmera Fashion Limited, said, “India exports nearly $50 billion worth of goods to the Gulf region, and textiles are a major component of this trade. If shipping disruptions continue around the Strait of Hormuz, naturally some competing nations like China and Turkey may attempt to capture a portion of India’s market share. China has large-scale manufacturing capacity and strong logistics networks, while Turkey already has a presence in cotton fabrics and ready-made garments in Middle Eastern markets. However, we must understand that India’s relationship with Gulf countries such as the UAE and Saudi Arabia is not just commercial, it is strategic and long-term. Agreements like the India–UAE CEPA, strong diplomatic engagement, and deep business networks provide India a significant advantage over competitors." He also added, "At the same time, India and its Middle East partners are actively working to ensure supply chain continuity. Alternative logistics routes through the Red Sea–Suez corridor, diversification of shipping lines, and new initiatives like the India–Middle East–Europe Economic Corridor (IMEC) are part of long-term solutions to reduce dependence on a single chokepoint. So while competitors may try to step in temporarily, India’s geopolitical partnerships, supply reliability, and strong textile ecosystem will ensure that we recover and maintain our market leadership in the Gulf region.”

Trade Policy and Logistics Diversification

Experts say the disruption is likely to accelerate India’s push to diversify trade logistics and deepen economic engagement with Gulf economies.

Mukherjee suggested that India could mitigate future risks by expanding rupee-based trade settlement, strengthening domestic manufacturing value chains, and pre-positioning inventory in Gulf free-trade zones. Negotiations for a potential India–GCC free trade agreement, launched earlier this year, are also expected to strengthen long-term trade resilience between the two regions.

For exporters, however, the immediate concern remains navigating volatile freight costs, uncertain shipping routes and fluctuating demand across one of India’s most critical global markets.

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