THE MIDDLE EAST CRISIS AND INDIA’S STRATEGIC CALCULUS

30 March 2026 . #2602 . International Affairs Perspective .

Mayilvaganan Muthumariappan examines the complex Middle East crisis and its multifaceted impact on India, particularly focusing on how India can actively protect its energy and diaspora interests amid the escalating instability in the region.

The analysis explores India’s energy security, focusing on import dependence and the need to diversify sources to mitigate risks from regional conflicts. It also considers the significant Indian diaspora in the Middle East and how heightened tensions could impact their safety and livelihood.

Furthermore, it delineates the fundamental inquiry regarding the policy options that India can pursue if the conflict escalates, including both diplomatic initiatives and strategic policy alternatives aimed at enhancing India’s standing and safeguarding its national interests.

Introduction

The current Middle East conflict stems from the long-standing hostilities between Israel and Iran, intensified by disputes over Iran’s nuclear program and military power. In February 2026, the U.S. and Israel launched Operation Epic Fury, striking Iran’s nuclear sites and leadership, including Ayatollah Khamenei. Iran retaliated with missiles and drones across Israel, U.S. bases, and Gulf states, turning it into a multi-front crisis.

The ongoing conflict in the Strait of Hormuz significantly disrupts shipping routes, causing deep concern among international maritime authorities. This situation not only leads to casualties but also exacerbates tensions in the region. The disturbances have global implications, contributing to a climate of instability that affects economies and security around the world.

India, reliant on Middle East oil imports and with a significant population in the Gulf, faces economic risks from shipping disruptions. Its relationships with Israel, the U.S., and Iran complicate neutrality, requiring a balance of geopolitical interests while safeguarding security. Broader regional tensions could impact energy security and aviation, prompting India to diversify fuel imports and enhance domestic renewable energy production.

India’s Strategic Stakes in the Middle East

The Middle East is crucial for India, largely due to its energy needs. By 2026, 45–55% of India’s crude oil imports will come from the region, mainly Iraq (17–20%), Saudi Arabia (13–15%), UAE (10–11%), Oman (3–5%), and Kuwait (2–4%). Proximity reduces transit costs, making the Gulf an economically viable supplier. India also heavily imports LNG from Qatar, UAE, and Oman, highlighting the region’s energy importance.

Trade with the Gulf exceeds $160–180 billion annually, including Indian exports of machinery and pharmaceuticals. Investment flows are mutual, with Indian firms and Gulf sovereign funds collaborating in various sectors. With millions of Indians in the Gulf sending home roughly $40–55 billion annually, diaspora welfare is vital. Strategic investments in Oman’s Duqm Port and UAE ports secure trade routes.

Key initiatives like the India–Middle East–Europe Economic Corridor (IMEC) link Indian ports through the Gulf to the Mediterranean. Maritime security operations, including Operation Sankalp, ensure safe passage through chokepoints, while domestic programmes enhance port efficiency.

Defence ties, particularly with Israel, focus on joint development of advanced systems, thereby modernizing India’s military and supporting its multi-alignment policy. India’s relationships with Gulf states and Iran emphasize energy and strategic interests, with Chabahar Port facilitating access beyond the Strait of Hormuz and strengthening ties with Saudi Arabia and the UAE.

Through these engagements, India aims to ensure energy security and trade resilience while balancing relations amidst regional instability.

Security of the Indian Diaspora

The nearly 9 million-strong Indian diaspora in the Gulf—across Iran, Saudi Arabia, UAE, Qatar, Oman, Kuwait, and Bahrain—represents a strategic and humanitarian priority for India. They play significant roles for several reasons.

Economic leverage: The diaspora generates over $40 billion in remittances annually, which supports millions of households and enhances India’s foreign exchange reserves. Key contributors like the UAE, Saudi Arabia, and Qatar make the diaspora vital to India’s economic resilience.

Strategic influence: Beyond economics, the diaspora strengthens bilateral ties and enhances India’s cultural influence in the Gulf, facilitating trade, investment, and diplomatic engagement. Security stakes: Concentrated in conflict-prone areas, their safety directly impacts India’s national security, with any disruptions leading to significant consequences.

To safeguard its citizens, India has established a multi-layered security framework. First, evacuation readiness: India shows operational capability in large-scale citizen rescues during crises, including Operation Raahat (Yemen, 2015) and the Vande Bharat Mission, ensuring rapid evacuation under hostile conditions.

Second, proactive diplomacy: India actively engages with Gulf governments to secure legal protection, labor rights, and coordinated crisis response. High-level consultations with Saudi Arabia, UAE, and other Gulf states bolster crisis preparedness.

Third, maritime and logistical protection: India conducts naval operations, such as Operation Sankalp, to secure sea lanes critical for Indian workers and trade, particularly through the Strait of Hormuz and surrounding waters.

Through evacuation readiness, consular diplomacy, and maritime security, India mitigates risks to its diaspora while safeguarding broader economic and strategic interests in the Gulf.

The diaspora thus serves not only as a human asset but also as a vital component of India’s regional influence and energy-security calculus.

Energy Security and Oil Market Vulnerability

India relies heavily on Middle Eastern oil. The Strait of Hormuz is critical, with approximately 40–50% of India’s crude oil and 50–60% of LNG transit through the Strait of Hormuz. Qatar supplies ~41% of India’s LNG imports (≈11.2 million tonnes). The U.S.–Israel conflict with Iran is pushing up Indian oil prices, straining India’s energy security and economic growth.

Disruptions create significant macroeconomic effects, apparently ~46% fall in LPG imports and a ~23% decline in Gulf crude imports. Consequently, Brent crude prices rise from $66–67 to $82–84 per barrel, even spiking above $100–120 per barrel at their peak, and LNG prices surge from $10 to $24–25 per MMBtu, escalating India’s import bill and inflation.

Rising consumer energy costs drive inflation. Early indicators from March 2026 show that retail fuel prices are rising, with companies like Nayara Energy raising petrol and diesel prices by up to ₹5 per litre and ₹3 per litre. LPG shortages have impacted small-scale industries, steel production, and the restaurant sector, driving up food and energy inflation.

The U.S. restrictions on Russian oil imports complicate India’s energy challenge. In this context, prolonged conflict in the Middle East could severely strain the domestic energy supply, escalate price shocks, and undermine stability for 1.46 billion people, which highlights the urgent need to diversify crude and LNG sources, expand strategic reserves, and accelerate renewable energy adoption.

Trade and Economic Vulnerability

The Middle East, specifically the United Arab Emirates, Saudi Arabia, and Qatar, constitutes a significant trade and energy partner for India. This region represents approximately 15% of India’s exports and around 20% of its imports.

Ongoing regional conflicts, especially around the Strait of Hormuz and the Red Sea, are causing delays in goods exports and are leading to an increase in shipping insurance premiums and freight costs, thereby resulting in supply chain bottlenecks and elevated expenses for Indian businesses.

According to the Wall Street Journal, insurers have surged war-risk premiums in the Persian Gulf to 5–10% of vessel value, compared to peacetime rates of ~0.25%, marking a 20–40× increase. High operating costs for vessels, particularly those valued between $50 million and $100 million, can significantly increase the expenses associated with each voyage, thereby reducing export competitiveness and causing delays in supply chains.

Reports show that shipping companies have raised freight rates by 40–50% on India–Europe routes, and routing changes have extended transit times by 10–20 days.

Balancing Act

India balances competing actors in the Middle East while pursuing its strategic priorities. It strengthens defense ties with Israel by acquiring military systems and enhancing cybersecurity capabilities, and it fosters strong relations with Gulf states—Saudi Arabia, UAE, Qatar, and Oman—to secure energy imports, establish trade partnerships, and support around 9 million Indian expatriates.

In collaboration with Iran, India works on the Chabahar Port project to create alternative trade routes to Central Asia and Afghanistan, thereby enhancing its regional influence.

This multidimensional engagement underscores India’s strategic autonomy and multi-alignment approach, enabling it to pursue national interests without getting drawn into regional rivalries.

The Prime Minister Modi’s March 2026 visit to Israel, along with his recent telephone talks with the Presidents of Iran and the United States, exemplifies India’s proactive diplomacy: it engages all relevant actors, signals cooperation, and avoids alignment with any single bloc.

By consciously adopting multi-alignment, India aims to safeguard energy security, protect its diaspora, and secure strategic assets and investments while maintaining flexibility in a volatile region. This approach enables New Delhi to navigate tensions—such as Gulf conflicts or Iran-U.S. sanctions—without compromising economic, strategic, or security objectives, reflecting a pragmatic, nuanced, and independent foreign policy framework.

Policy Options

Middle East instability is likely to persist as conflicting parties pursue competing objectives and maintain political differences. Meanwhile, India will continue its pragmatic balancing approach, safeguarding its strategic interests without taking sides. Future policies should focus on energy diversification, maritime security, and proactive diplomatic engagement with regional actors.

Some options for India include diversifying India’s energy sources to reduce reliance on the Gulf by seeking crude oil from suppliers like Nigeria and Brazil, while still importing from Russia, Gulf, and the U.S. Improving long-distance energy transport through LNG-style methods and strengthening domestic shipbuilding will help. Prime Minister Modi’s announcement on March 25, 2026, to boost domestic shipbuilding through the Make in India initiative supports this strategy and encourages LNG diversification from Australia, the U.S., Russia, and East Africa.

India should focus on strengthening its Strategic Petroleum Reserves (SPR). The country has about 5.33 million metric tonnes (MMT) of SPR in Visakhapatnam, Mangalore, and Padur, which can cover around 10–12 days of imports. Increasing capacity at coastal locations, like using underground salt caverns in Rajasthan, provides affordable storage for emergency crude. Better operational efficiency and pipeline connections to refineries will improve SPR effectiveness.

Also, India should work with Sri Lanka to finalize the agreement to develop the Trincomalee oil tank farm, a World War II facility that can serve as a significant supplementary reserve, allowing both countries to benefit from a joint India–Sri Lanka SPR that acts as a regional hedge against disruptions in the Middle East, with shared access and release protocols that reduce risk and strengthen energy ties.

India should speed up its renewable energy transition, aiming for 500 GW by 2030 to decrease reliance on imported fossil fuels and shield the economy from global energy price shocks.

Expand domestic exploration and production. Onshore oil fields in Rajasthan, especially Mangala, Bhagyam, and Aishwariya, offer potential for enhanced recovery. Secondary recovery and modern drilling can benefit older fields in Assam and Gujarat. Significant untapped reserves exist in offshore basins like Krishna-Godavari, Cauvery, and Andaman & Nicobar, as well as in shale oil and gas in Rajasthan, Cambay, KG, and Cauvery basins.

India should enhance its policy frameworks to attract private and foreign investment. The Hydrocarbon Exploration Licensing Policy (HELP) and Open Acreage Licensing Policy (OALP) encourage proactive bidding, while investments in the National Gas Grid and CNG infrastructure increase domestic gas production and reduce reliance on LNG imports.

While pursuing energy diversification and domestic capacity-building, India must continue and deepen engagement with Gulf partners, maintaining strong economic, energy, and diaspora ties, ensuring that strategic autonomy and regional stability remain central to its Middle East policy.

Conclusion

The ongoing Middle East conflict highlights India’s challenging strategic environment, which includes energy security, trade, diaspora safety, and defense upgrades. By focusing on diverse partnerships and strategic independence, India seeks to protect its interests without getting involved in regional disputes. Improving energy sources, creating reserves, and boosting maritime security are key to reducing risks and keeping influence in an unstable region.

Dr. Mayilvaganan M., Director of CHSIA, is a visiting professor at MIT-WPU, independent Geopolitical & Human Security consultant and an international affairs specialist.

Views expressed are those of the authors and do not necessarily reflect the views of the CHSIA, an independent, nonprofit and nonpartisan organization.