Middle East War May Derail India's Basmati, Fertiliser, and Diamond Exports — Crisil Flags Payment Delays, Cost Surge

The ongoing Israel-Iran conflict in the Middle East is set to significantly disrupt India’s export-dependent sectors, especially basmati rice, fertilisers, and cut and polished diamonds, according to a recent report by Crisil Ratings.

Among the three, the basmati rice sector is expected to bear the maximum brunt. Iran and Israel together account for approximately 14% of India’s total basmati rice exports in FY25. While Crisil believes the broader export base—covering the Middle East, Europe, and the US—offers some cushion, it warns that a prolonged geopolitical crisis may trigger delays in payments from buyers in these regions. This could lead to a stretched working capital cycle for exporters already operating on thin margins.

“The risk is not just about losing demand, but also about payment delays and rising financial stress,” the report states. Exporters may find it harder to collect receivables on time, especially from countries caught in the conflict crossfire.
The diamond sector, too, is exposed—albeit to a lesser extent. Israel, a major global diamond trading hub, accounted for about 4% of India’s diamond exports last year. However, Crisil notes that domestic diamond polishers can mitigate the impact by rerouting trade through alternative hubs like Belgium and the UAE, while ultimate buyers in the US and Europe remain stable.

The fertiliser sector could also see marginal disruption due to shipping route uncertainties and a spike in global input prices.

Adding to the pressure, global crude oil prices have surged. Brent crude has jumped to $73–76 per barrel in recent days, up from an average of $65 per barrel during April–May 2025. This rise in oil prices is likely to inflate freight costs and marine insurance premiums, especially for sectors dependent on overseas shipping. Crisil concludes that if tensions in the Middle East escalate or persist, India’s export sectors could face a double whammy of operational bottlenecks and financial strain, making the near-term outlook increasingly volatile.

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