How Israel-Iran Conflict may Impact Basmati Rice Export from India?
While the nation is mourning the deadly Ahmedabad London Plane Crash, Israel and Iran have a new reason to mourn and to be worried. The ongoing Israel- Iran conflict has not only left both the nations worried about their regional stability but also the ramifications of this conflict has led to a significant decrease in the figures of basmati exports from India. Worthless to say basmati rice is one of the most preferred varieties of rice among the countries dependent on rice import from India.
This article by Indian Rice Exporters Federation (IREF) will help you examine the anticipated impact of Israel- Iran conflict on India, particularly on rice exports and what are the possible challenges that may arise amidst the conflict.
What’s the Current Situation?
Though the conflict and tension between Iran and Israel is not new to the world but, however; it has increased sharply after the deaths of senior Hezbollah and Hamas leaders. Back in October 2024, Iran launched approximately 180 missiles at Israel, the major of which fell short of targets and Israel remain untouched with the possible destructions. The attack was Iran’s way of revenge for the death of senior Hezbollah and Hamas leaders. In April also Iran launched a revenge attack on Israel in response to an attack on Iranian diplomatic building in Damascus, Syria.
Till the time of writing the Israel- Iran conflict has entered fourth day with escalated tensions and broaden attack. This escalated tension means Indians are nearing economic challenges especially related to basmati rice exports. According to the Ministry of Commerce and Industry, the volume of basmati exports to Iran has declined by over 30% in the last quarter, which is further expected to decline up to 50% if the conflict deepens. The conflict reflects economic challenges for approx. 1.5 million farmers in India who are dependent on basmati export. If the current conflict worsens export of basmati rice may face and aggregate loss of approx. ₹15,000 crores (1.8 billion).
Possible Impacts of Israel-Iran Conflict on Trade
The ongoing dispute will not only affect export of basmati rice but also the major trade sectors that includes surge in oil prices, changed shipping routes will increase the time duration for the shipment of products, and unstable stock markets. Let us understand the impacts in detail:
- Impact on Basmati Exports from India
Out of the total Basmati Rice Exported from India, 25% dealing is related to basmati exports to Iran, the ongoing conflict is affecting it severely. As the conflict is escalating, the impact of the dispute is visible as the trends of grain market in Ghaziabad reflects the decline in the rate of paddy basmati 1509 rice by Rs. 200 to 300 per quintal in last 2 days. The sharp decline in the rate is likely to reduce the profit of farmers to half.
India is the largest rice supplier to Iran, hence the escalation in dispute could negatively impact the figures of rice export from India. Reports by The New Indian Express suggest that around 25% of India’s basmati rice exports are sent to Iran. However, to support its local crop, Iran has imposed a two-month import ban from October 21 to December 21, which is already affecting India’s exports. Additionally, insurance companies have stopped providing coverage for exports to Iran, leading to a drop in basmati rice prices by Rs 800 per quintal.
- Surge in Oil Prices
Soon after the Israel's air attack in Iran oil prices dramatically surged. After the dramatic escalation of tensions in the Middle East the price of Brent crude rose to more than 10%. This ongoing tension is likely to impact India as India depends heavily on imports for fuel needs and up to 85 percent of fuel needs are dependent on imports.
- Instability in Share Market
The ongoing conflict is raising concerns of a broader regional conflict. The conflict followed by The Russia-Ukraine war and US-Iran tensions have also increased instability in the oil market. ONGC and Oil India shares rose up to 4% in the stock market.
Key Takeaways from the Conflict
- Out of the total Basmati Rice Exported from India, 25% is exported to Iran, the ongoing conflict is affecting it, and farmers profit may reduce to half
- Insurance companies have stopped giving insurance on exports to Iran, this further reduces the possibilities of export to Iran
- The effect of conflict is visible as the trends of grain market in Ghaziabad reflects the decline in the rate of paddy basmati 1509 rice by Rs. 200 to 300 per quintal in last 2 days
- Export shipments from India were resumed via Red Sea in May this year, however amidst the Israel- Iran Conflict the routes might have to take the longer route of Cape of Good hope. This in turn will increase the freight charges
- Israel is the 32nd largest trading partner of India hence the conflict will directly or indirectly affect India
- Due to the ongoing conflict, Indian shippers have been warned to remain vigilant while transiting through the Strait of Hormuz, one of the busiest trade routes. This might trigger or cause hindrance in exporting basmati rice from India to Iran.
- Iran is one of the largest importers of Indian basmati rice, contributing up to 30-35% in peak years. (700,000-800,000 tonnes annually)
- In FY22, Iran’s share of India’s exports of basmati rice was valued at $0.81 billion or close to 23% of total shipments valued at $ 3.54 billion. In FY25, Iran’s share declined to 12% at $ 0.75 billion of the total exports of a record $5.94 billion as payments were delayed because of US sanctions
Conclusion
Trade relations between India and the two nations (Israel -Iran) is likely to see decline in the upcoming days as the conflict is likely to see a full-stop in the upcoming days. The impact of Israel- Iran dispute on basmati exports from India is a reminder for other nations of how interwoven global markets are. At this stage, stakeholders need to prioritize adaptability, strategic planning, and resilience to safeguard the future of India’s most adorable consumable basmati rice. However, farmers can still withstand with the economic challenges by ensuring the quality and reputation of basmati rice remains same all the time regardless of the conflicts between the two major rice importing nations.