Rising Energy Insecurity, Trade Disruptions, and the Urgent Need for Long-Term Economic Resilience
28 February 2026, Israel and The United States carried out pre-emptive strikes on Iran due to failed talks. Iran was not ready to stop funding its proxies such as Hamas, Hezbollah, Houthis. The top leadership of Iran was killed in the strikes including its supreme leader Ayatollah Ali Khamanei.
The war lasted more than a month before entering into a two week ceasefire, Iran attacked various countries in west Asia . Key targeted nations include Israel, Saudi Arabia, the United Arab Emirates (UAE), Kuwait, Bahrain, Qatar, Oman, Iraq, and Jordan. Iran attacked due to these countries hosting American military bases.
Iran fired multiple missiles and low cost drones towards these countries, the interception was costly. Each Interception cost between 4 million dollars to 12 million dollars to intercept 20,000 dollar shaheed drones for the targeted countries. Intercepting is a massive financial strain for these countries.
Iran imposed a naval blockade on the Strait of Hormuz, a strategic chokepoint. The Strait of Hormuz connects the Persian Gulf with the Gulf of Oman. Nearly 20 to 30 percent of crude oil supply passes through this strait. Iran gained significant leverage, by planting sea mines, deploying sea UAVs in strait, and collected a toll of around 2 million dollars per vessel for safe passage.
The talks hosted by Islamabad on 11 April 2026, did not yield any results due both parties’ maximalist demands.
Impacts of the Conflict on Bharat:
The impacts of the war are visible, and has led to disruptions in shipping routes, higher war-risk insurance premiums and delays in cargo movement across several countries.
The cost of crude oil crossed $100 per barrel. The ships carrying crude oil, LPG, LNG are struck in the ports of Persian Gulf. The cost of the insurance for the commercial ships shot up, and most insurances are not applicable during war time.
Bharat currently imports more than 90 percent of its crude oil. More than 50 percent arrives from West Asia and around 30 % passes through the Strait of Hormuz. However 90 % of LPG (Cooking gas), 66% LNG ( Natural gas) transit through this narrow strait.
The price rise of crude oil will impact the government revenue, on 21 March the government reduced the excise duty by 10 rupees on petrol and diesel, to offset high losses incurred by oil marketing companies (OMCs). It costs ₹7,000 crore every fifteen days, annually the cost will be between ₹1.3 lakh crore to ₹1.75 lakh crore.
As per UNDP estimates, if the conflict escalates more than 2 million people might fall into poverty in Bharat due to increased food product prices, LPG and crude oil prices. Globally it might push more than 8 million into poverty.
The Basmati exports disrupted, 70 to75% of Bharat’s around 6 million tonnes are supplied to Iran, Saudi Arabia and the UAE impacting millions of farmers and exporters. The government is considering restricting sulphur exports, to ensure domestic availability for making fertilizers like Single Super Phosphate (SSP).
Approximately Ten Million people work in Gulf countries, remittances from the Gulf Cooperation Council (GCC) to Bharat around $50 billion in FY2025, constituting about 38% of India’s total $135.4 billion inflow. These inflows are vital for Bharat’s current account deficit and support family consumption and education, particularly in states like Kerala and Maharashtra.
The crisis makes one reality unmistakably clear, while short-term measures may help the nation weather immediate shocks, they cannot substitute for structural preparedness. Temporary tax cuts, subsidies, and supply adjustments may offer relief, but they do little to shield Bharat from recurring external disruptions of this scale.
What is required is a decisive shift toward long-term resilience. Diversifying energy import sources beyond West Asia must become a strategic priority, alongside expanding strategic petroleum, LPG, and LNG reserves to cushion future shocks. At the same time, accelerating the adoption of electric vehicles, investing aggressively in renewable energy particularly solar and strengthening nuclear energy capacity can reduce dependence on volatile fossil fuel markets. Greater emphasis on research and development will be essential to drive innovation in energy storage, green hydrogen, and grid efficiency.
Beyond energy, the crisis also highlights vulnerabilities in agriculture and supply chains. Promoting organic and low-input farming can reduce dependence on imported fertilizers, while strengthening domestic fertilizer production and logistics will ensure food security. Expanding domestic manufacturing, improving port and shipping infrastructure, and securing alternative trade routes can further insulate the economy from geopolitical disruptions.
Ultimately, this is not just an economic challenge but a strategic inflection point. If approached with foresight, it offers Bharat an opportunity to transition from vulnerability to resilience building an economy that is not only capable of absorbing global shocks but also less dependent on them.
Chaluvadi Sai Dinesh is a researcher focusing on geopolitics, energy security, and Bharat’s foreign policy.
