While some see Nasrallah’s assassination as a strategic victory for Israel, the Hezbollah leader emerged as the most important figure in the Arab world while the only one holding back Israeli forces during the 2006 invasion. It was credited with being an Arab power, among others. Former Israeli Prime Minister Ehud Olmert warned in an interview with a TV channel that an Israeli incursion into Lebanon would be a “mess” and could result in a “clear defeat of the Hezbollah militant group.”

The widening of the conflict has increased the risk of trade disruptions, as Hezbollah has close ties to Yemen’s Houthi rebels, who are responsible for the majority. Attacks on ships Passing through the Red Sea. This is significant for India as it is heavily dependent on the Suez Canal route for its trade with Europe, the Americas, Africa and West Asia, as these regions are expected to grow in FY23, according to CRISIL Ratings. The share was over $400 billion.

Effects on India and Silver Lining

Exporters have long feared a direct confrontation between Israel and Iran because it would mean a prolonged blockage of the main Red Sea shipping route. The dispute escalated as Indian exporters began to feel the effects of the Red Sea shipping lane crisis, with exports falling by 9 percent in August.

This was largely because India’s petroleum exports fell by a sharp 38 percent in August due to the Red Sea crisis, forcing importers to seek alternative sources amid shrinking margins and rising shipping costs. fell Exports of petroleum products fell to $5.95 billion last month from $9.54 billion in August last year, official data showed.

A Crucial report in February this year warned that shipping markets will further impact exports, as Europe accounted for 21 percent of India’s total petroleum product exports in fiscal 2023, and rising shipping costs. The overall spread of petroleum product exports is likely to decrease. Profitability of standalone refiners.

However, there is a silver lining in India’s trade with West Asia due to the neutrality of regional players like Saudi Arabia, UAE, Kuwait and Qatar, which have so far not been involved in the conflict. India’s trade with these Gulf Cooperation Council (GCC) countries grew by 17.8 percent between January and July 2024 compared to the same period last year, according to a Global Trade Research Initiative (GTRI) report. has happened India’s exports to Iran also increased by 15.2 percent during this period.

Long trade routes are pushing shipping rates higher.

According to data shared by the International Monetary Fund (IMF), the volume of trade through the Suez Canal fell by 50 percent year-on-year in the first two months of the year, while the volume of trade through the Cape of Good Hope was down from last year. An estimated 74 percent increase from year-over-year levels.

This comes as major shipping routes, particularly through the Suez Canal and the Red Sea, have forced ships to take longer routes around the Horn of Africa, adding 15-20% to shipping costs. The percentage has increased. This has adversely affected the profit margins of Indian companies, especially those that export low-end engineering products, textiles, garments, and other labor-intensive goods.

A former trade officer and head of GTRI said that while India’s overall exports to the EU have grown by 6.8 per cent, sectors such as machinery, steel, gems and jewelery and footwear have declined. He said India faces tough times ahead, especially for industries that rely on high-volume, low-value exports, as rising freight costs are expected to further strain trade. .

However, there may be relief if Israel succeeds in neutralizing the Houthis, the Iran-backed Yemeni rebels. It could potentially reduce barriers along the Red Sea. Israel has already launched attacks against the Houthis in response to their actions,” GTRI said.

Global shipping firms are seeing increased profits.

Ever since the Red Sea crisis broke out, Indian exporters have been calling on the government to focus on developing a world-renowned Indian shipping line. The request comes at a time when India’s remittances on transport services are on the rise with growing exports. In 2022, merchants remitted over $109 billion in transport service charges.

Exporters said an Indian shipping line would reduce “arm twisting” by foreign shipping lines, especially by Indian micro, small and medium enterprises (MSMEs).

Notably, global shipping lines are seeing their profits increase during the Red Sea crisis. Danish company Maersk, seen as a barometer of global trade, reported its third profit since May in August, citing higher freight rates due to the Red Sea crisis and solid container shipping demand. increased the prediction of

A JP Morgan report earlier this year said the longer the barriers persist, the higher shipping rates will remain. Even so, “a potential silver lining is that there remains an excess supply of container ships globally,” and many ordered during the pandemic continue to enter service. Therefore, it seems likely that once the barriers are lifted, shipping rates could come down quite quickly, the report said.

Threats to India-Middle East-Europe Economic Corridor Plans

Escalation in West Asia could threaten the development of the conflict. India-Middle East-Europe Economic Corridor (IMEC), which was announced during the G20 summit in New Delhi last year.

The IMEC project consists of an Eastern Corridor connecting India to the Gulf region and a Northern Corridor connecting the Gulf region to Europe. It will include railway and ship-rail transit networks as well as road transport routes. It was envisioned to reduce dependence on the Suez Canal and create a route that would be 40 percent faster, and was also seen as a strategic response to China’s Belt and Road Initiative. However, the outbreak of war in West Asia could complicate matters for the development of the trade route.