After The Smoke Clears: What An Iran-Israel Ceasefire Means

The reverberations of the conflict still echo far across the borders into the Indian subcontinent, where geography, geopolitics, the presence of a large diaspora and global trade enmesh it with whatever happens in West Asia. 

With the ceasefire holding, at least for now, India has been granted a narrow window of pause. For policymakers, this is but a strategic breather. Make no mistake: The risks remain high, and the long game has only just begun.

A Welcome, If Temporary, Breather

Over the past months, India has been bracing for a conflict spillover. The threat of an expanded war in West Asia carried too many familiar risks: Proxy escalations, sectarian unrest, trade disruptions, and diplomatic entanglements.

With Iran and Israel backed by opposing poles of global power, any intensification of hostilities had the potential to cascade across borders into the South Asian region.

For India, the war was also a challenge, as it faced the difficult prospect of recalibrating its balancing act between Tehran, Tel Aviv, and Washington.

Economic Relief Amid Fragility

Perhaps the most immediate benefit has been economic. India’s energy arteries run straight through West Asia. The Strait of Hormuz — a narrow, contested channel between the Persian Gulf and the Arabian Sea — serves as a lifeline for the subcontinent’s oil and gas needs.

According to US Energy Information Administration, some 20-21 million barrels of oil are shipped daily through the Strait. Of this, some 1.5-2 million barrels are destined for Indian refineries.  

Any disruption here hits India hard — and quickly. The ceasefire has helped ease fears of a supply shock, stabilising oil markets and nudging prices downward.

August futures for Brent crude, after shooting up to over US$ 79 a barrel, came down to US$ 67 after the ceasefire was announced. For India, the drop in oil prices provides critical breathing room.

India’s trade with the Gulf countries is also considerable, and stood at US$ 178.56 billion in 2024-25. This lucrative trade, mostly out of Gujarat and Maharashtra, was in danger of being severely mauled by the war.  

India’s engagement in West Asia has always been a balancing act. We maintain robust defence and technology ties with Israel, deep historical and cultural links with Iran, and energy-driven partnerships with Saudi Arabia, the UAE, and Qatar. To top it off, we also retain intelligence cooperation with the US, and with Iran and Israel in the region.

The Iran-Israel conflict placed New Delhi in an awkward and unsustainable position. During the height of hostilities, calls grew louder — domestically and internationally — for India to clarify its position.  

However, India chose strategic ambiguity, issuing muted statements while emphasising regional stability. That silence, though frustrating to some allies, was calculated. India cannot afford to antagonise either Tehran or Tel Aviv. Israel is a top arms supplier and strategic partner in cybersecurity and defence.

A single missile strike or naval blockade in the Strait could upend India’s supply chains. Even a temporary disruption would spike global energy prices and cause immediate fuel shortages.

Although India maintains strategic petroleum reserves — estimated at around 5.33 million metric tonnes — they offer limited cover, sufficient for a few weeks at best.

Ancient Persia or modern Iran has and will remain India’s geographic and logistical gateway to Central Asia. In the current context — through the Chabahar port — vital to New Delhi’s strategic ambitions in a region increasingly dominated by China.

The current ceasefire has given India the diplomatic room to continue straddling this geopolitical divide. Should the conflict reignite, the days of stressful hedging will have to be the creed for India’s diplomats and diaspora in the region.

Need For Diversified Routes  

In a scenario where war again ignites in the deserts and wadis of West Asia, New Delhi would be forced into high-stakes diplomatic manoeuvring. It would have to negotiate alternative supply lines, likely at a premium, while attempting to mediate with — or at least de-escalate — hostile regional actors.

The ripple effects would extend to Indian exporters, particularly those with business interests in the Gulf. Insurance premiums would rise, shipments would slow down, and remittances from the nearly nine million Indian expatriates working in the region, who contribute about 36 per cent of our remittance inflows, could be in jeopardy.

Transport to India’s other vital markets — Europe and the US — would also be jeopardised if the Gulf and the Suez Canal remain threatened. The longer route via the Cape of Good Hope is costlier and subject to the vagaries of Sudanese pirates.

Many Potential Alternatives

Right now, India’s long-term strategy in the region hinges not just on energy imports, but also on infrastructure-led connectivity. The Chabahar port in southeastern Iran — developed with Indian assistance — is central to New Delhi’s ambitions to bypass Pakistan and establish a trade corridor to Afghanistan and Central Asia.

Combined with the International North-South Transport Corridor (INSTC), it is part of a grand design to integrate India with Eurasian markets. 

India need not place all eggs in two baskets of alternate routes — the Russian idea of INSTC, in which Iran is intrinsically involved, or the US-backed India-Middle East-Europe Economic Corridor (IMEC).

Instead, it should also start exploring China’s overland route via Russia (the Belt and Road Initiative, ie., BRI, also known as One Belt One Road, ie., OBOR), to access European markets, besides the Arctic sea route, which goes via Siberia and Murmansk to Europe.  

The melting of the Arctic ice-cap is also creating new routes to use to connect with the American continent. Scientists anticipate that in another decade, segments of the Arctic Ocean will be seasonally ice-free, potentially transforming the region from a frozen frontier into a bustling corridor of global commerce.

Preliminary studies suggest that Arctic Sea routes — in particular the so-called Northern Sea Route along Russia’s Siberian coast — could reduce travel distances between North America, Europe, and Asia by 30-50 per cent, reducing shipping time by as much as 2-3 weeks.

New Trade Geographies & Energy Sources

India also needs diversified trade geography. Africa, a continent with which India has traded since time immemorial, and where Kutchi and Sindhi traders have had bases for centuries, is a market worth nearly US$ 3 trillion, and is expected to be worth US$ 5.5 trillion by 2050.

We have to redouble our efforts to open up the continent’s markets to Indian trade, where China has already stolen a march over India. However, astute and sustained trade diplomacy by India’s missions and merchant chambers, should result in India’s bilateral trade with the continent pushing towards US$ 200 billion within the next five years, which the Indian government is targeting.  

Similar moves to increase trade with Asean, East Asia and Latin America, has to be placed on India’s priority list to reduce dependence on West Asia and US.  

India also needs to continuously diversify its energy sources. The nations around the Persian Gulf will and should continue to supply a large chunk of its energy requirements.

However, recent shifts towards Russia, the US, and West African producers should be given due attention, in order to make the Indian energy basket more shock-resilient.

At the same time, India needs to boost its strategic petroleum reserves and incentivise domestic exploration, drilling and manufacturing, leveraging its US$ 25 billion Production-Linked Incentive (PLI) schemes, to insulate key sectors from external disruptions.

The Sectarian Undercurrent

Though often overlooked, India cannot ignore the sectarian implications of a West Asian war. With one of the world’s largest Muslim populations — including significant Sunni and Shia communities — India remains vulnerable to ideological reverberations from conflicts in that part of the world.

In recent years, India has been largely successful in containing sectarian clashes. But the passion which this conflict — where Shia Iran is at odds with its Sunni neighbours, even though all of them have an anti-Israel bias — can have a destabilising effect on Shia and Sunni communities worldwide.  

Radical groups, both domestic and transnational, could twist and exploit the narratives to recruit or incite violence. The ceasefire has helped lower this ideological temperature. The absence of daily carnage reduces emotional volatility and narrows the space for extremist mobilisation. But this calm, too, is fragile.

Terror Possibilities In A Shifting Landscape

The wider instability in West Asia has had a spillover effect on transnational terrorism. Groups operating across South and Southeast Asia — particularly in Pakistan, Myanmar, and parts of Southeast Asia — may find opportunity in chaos. Israeli-linked or Western-affiliated targets in India and the broader region could face increased risks.

India needs to strategically raise its alert levels and use more intelligence assets and electronic surveillance to ensure its safety, especially in urban centres, strategic ports, and sites of diplomatic significance. The possibility of asymmetric attacks, particularly against soft targets such as places of worship, embassies, or tourists, remain a worrying probability.

What Lies Ahead: Opportunity Or Uncertainty?

The Iran-Israel ceasefire is not a peace agreement, it remains war on a pause button mode: A precarious situation waiting for a spark to rekindle it. However, for India, it is a chance to retool its energy strategy, deepen regional diplomacy, and reaffirm its connectivity goals.

But this opportunity could end sooner than we can imagine. The time to act, therefore, is now.