After the joint military action by America and Israel, Iran has closed the Strait of Hormuz indefinitely. Along with this, there are reports of complete stoppage of trade movement in Bab el-Mandab located at the southern end of the Red Sea. Both these routes are considered the lifelines of the world’s oil and cargo trade. Their closure has not only created panic in the international market, but a deep crisis is also looming over India’s import-export system. According to the latest report of JM Financial, the worst impact of this worsening situation can be seen on big Indian companies like Adani Ports, JSW Infrastructure and GMR Airports.
Blockade on sea routes, freight tension is increasing
Both the Strait of Hormuz, which connects the Persian Gulf to the Arabian Sea, and the Bab-al-Mandeb of the Red Sea are very important for trade between Asia, Europe and the Middle East. A large part of India’s trade passes through these sea routes. According to the report, by the financial year 2025, about 31 percent of India’s total import-export (EXIM) was related to the Middle East and North Africa (MENA).
Now, due to the closure of these routes, commercial ships have to take a long detour through Africa’s ‘Cape of Good Hope’. This long distance directly means higher fuel consumption, increased insurance premiums and huge delays in the delivery of goods. Obviously, when the cost of transportation of goods will increase and the frequency of ships will decrease, it will also affect the price of every small and big item available in the market. This may also weaken the competitiveness of Indian exporters in the global market.
From Adani to JSW, the breathing of these giants is stuck
This geopolitical crisis has raised lines of concern on the forehead of the Indian logistics and port sector. If we talk about JSW Infrastructure, they have an important liquid storage terminal in Fujairah, United Arab Emirates (UAE). In the last financial year, this terminal had a share of about 13 percent in the total profit (EBITDA) of the company. Due to work being affected there, there may be a dent in the company’s earnings. Apart from this, the company’s proposed expansion in Oman may also get eclipsed due to this instability.
At the same time, this time is also quite challenging for the country’s largest private port operator ‘Adani Ports’ (APSEZ). Adani Group, which has a major share of 27 percent in India’s total cargo, may face shortage of oil, LNG and containers coming from the Persian Gulf. Although their profits from Haifa Port in Israel are relatively low (1.5 percent) and their investments in places like Tanzania and Australia are safe, the turmoil in the entire Gulf region is sure to have a negative impact on the maritime transport business. Apart from this, pressure on Gujarat Pipavav Port may also increase due to disruption in trade through the Red Sea and there may be instability in freight rates.
Will be a burden on the common man’s pocket
This crisis is not going to be limited to sea ports only. This is also a worrying situation for GMR Airports. Due to reduction in flights to the Middle East, the number of international passengers may decrease at major airports like Delhi. The lack of transit passengers will have a direct impact on airports’ non-aviation revenues (shops, lounges, etc.) from where they earn the most profits.
The biggest concern for the common man is regarding LPG. India imports about 65 percent of its total LPG consumption, of which more than 90 percent comes from the Middle East. This will have a direct impact on gas handling companies like Aegis Logistics. Saudi Arabia has already increased the price of propane gas by $ 50 per ton. If this war prolongs, gas prices may skyrocket due to shortage of ships and expensive fares.
Also read- Despite Israel conflict, big update from Adani Ports, Haifa Port fully operational