Mumbai, July 29: Escalating tensions in West Asia and potential disruptions at critical global shipping routes could increase costs for Indian exporters and importers, affecting freight rates, marine insurance premiums, and supply chain operations, according to a report by CareEdge Ratings.

The report highlighted that prolonged uncertainty around the Strait of Hormuz and the Red Sea could pose significant challenges for businesses, particularly small and medium-sized enterprises that have limited flexibility to absorb higher expenses.

The Strait of Hormuz plays a vital role in India’s energy security, with a large share of the country’s crude oil imports and key energy supplies such as LNG and LPG passing through the route. Any disruption could lead to higher global oil prices, increased production costs, and added inflationary pressure.

The report noted that simultaneous disruptions across major maritime chokepoints could create further strain on global trade networks. Longer shipping routes, including diversions around the Cape of Good Hope, may increase transit times by several weeks while adding to logistics and transportation expenses.

Rising energy costs and supply chain disruptions could weigh on industries dependent on imported raw materials and fuel. While larger companies with diversified supply chains may be better positioned to manage the impact, smaller exporters and importers could face pressure on profit margins, cash flows, and working capital requirements.

Experts believe businesses may need to strengthen supply chain resilience, diversify sourcing options, and adopt proactive risk management strategies to navigate ongoing geopolitical uncertainties.

The evolving situation in West Asia remains a key factor for global trade and energy markets, with potential implications for India’s economic outlook and business environment.