On 6 March the American Office of Foreign Assets Control issued a 30-day waiver allowing Indian refiners to purchase Russian oil from ships that are stranded at sea. This is a stop-gap measure to reduce pressure caused by Iran’s attempt to take global energy hostage, said US Treasury Secretary Scott Bessent on a post on X.
This latest directive by the US is a temporary, yet dramatic turn of events since 6 August 2025, when a US Presidential order imposed a 25 per cent tax on India for importing Russian oil (on top of another 25 per cent tax), only to be lowered to a reciprocal 18 per cent tax on 6 February 2026 after the US was sufficiently convinced that India had reduced its purchases of Russian oil. The US expects India to purchase oil from it which is more expensive for India than buying oil from the Gulf or from Russia.
Trade has had to keep up with changes in policy due to out-of-control geopolitical decisions. Some countries and companies, like the sellers of oil, will be better off by the end of it due to the inflationary effects of war. Many others are likely to lose.
Take only the events of the last week, for instance.
Israel, assisted by the US, carried out the assassination of Ayatollah Ali Khomeini, the Supreme Leader of Iran on 28 February. Since then, Israel and the US continue to bomb Iran within that country and in international waters. In turn, Iran has launched attacks against Israel and American interests in states around Iran, de-stabilising the region.
The impact has been severe along the 167-km-long Strait of Hormuz, a maritime passage that is 39-km wide at its narrowest point. India and China are dominant buyers of Strait-transiting crude oil, according to a trade and data analytics firm Keplr, while a significant portion of India’s liquefied natural gas imports passes through the waterway.
Disruption of supplies
On 2 and 4 March Saudi Arabia’s Ministry of Defense said that Aramco’s Ras Tanurah refinery had come under attack by drones, its impact leading to disruption in supplies. On 2 March, Qatar Energy also said that its facilities in Ras Laffan Industrial City and Mesaieed Industrial City had stopped production of liquefied natural gas (LNG) due to military attacks. By 3 March it stopped production of downstream products including urea, polymers, methanol and aluminum.
A day later QatarEnergy declared force majeure to its affected buyers. In contract law, force majeure is a clause in contracts which frees both parties from liability or obligation when an extraordinary event, such as war, epidemic or crime, were to occur.
But even as energy producers prepared to contain their losses, insurance companies started to reassess the risk they had underwritten for businesses in the region. If war is about to make some people richer, then there is no reason for the insurance companies to bear any losses is the argument.
Reports emerged of Iranian naval units broadcasting warnings on VHF Channel 16 stating that “no vessel is permitted to cross the Strait of Hormuz”, even while Irani officials deny having ordered any blocking of the Strait.
Maritime insurers withdrew war risk cover on ships transiting through Iranian waters either ways, including from the Persian/Arabian Gulf and coastal and adjacent waters up to the Iran-Pakistan borders. On 2 March, North Standard, a UK-based Protection and Indemnity (P&I) provider, said that the Club has received Notice of Cancellation from re-insurers in respect of certain war risks. “As a result, it has become necessary for the Club to issue corresponding Notice of Cancellation in respect of those same war risks,” it added.
Similar notices were issued by other P&I clubs including Gard, Skuld, the London P&I Club and the American Club. While some insurers like Gard said that existing rates would apply for ships within the area, “depending on the precise terms of the insurance”, if a ship is proceeding to the affected area, those owners would need to make new arrangements for additional war risks insurance.
The new arrangements, however, are significantly higher than the original cost.
By 4 March, North Standard added Bahrain, Djibouti, Kuwait, Oman and Qatar to its “war risks class - additional premium areas”. “It is essential to urgently verify the validity and coverage of War Risk Insurance,” said the Japan P&I Club on 6 March. “The Joint War Committee has added Bahrain, Djibouti, Kuwait, Oman and Qatar to its Hull War, Piracy, Terrorism and Related Perils Listed Areas,” said insurer Skuld.
Some ship owners have tried to access the Strait inspite of the risks involved, by switching off transponders while traversing through the Strait. But the legal right to take that decision rests with the captain of the ship. The International Convention for the Safety of Life at Sea - Chapter V states that the owner (of a vessel) shall not prevent the master of a ship from taking or executing any decision, which, in the master’s professional judgement, is necessary for safety of life at sea and protection of the marine environment.
In maritime terminology master is the captain of the ship. “As such, the master has the ultimate say as to whether or not the ship will undertake a voyage which is potentially unsafe. However, the financial consequences of such a decision will depend on a party’s contractual commitments,” says a Gard statement.
By 4 March, US President Donald Trump directed the USDFC, an American development finance institution, to provide, at a reasonable price, political risk insurance and guarantees for all maritime trade, especially Energy, traveling through the Gulf. “If necessary, the United States Navy will begin escorting tankers through the Strait of Hormuz, as soon as possible,” he added. In reality, the USDFC had agreed to support only American and allied businesses operating in the Middle East during the period of conflict. That commitment failed to reign in commercial insurance risk premium.
All of these developments have started to have significant implications for India and the wider region around it.
Ancient civilisations
India and Iran, as ancient civilisations, have had historical and mostly cordial relations. Blue lapis lazuli, from mines in Afghanistan and made popular through Persia, can be found on some paintings and monuments within India. Iran represents the muslim Shia community, and India has the second-largest number of Shia people in the world. The Parsi community in India have their origins in, and were displaced from, that region. There is a Vishnu temple in Bandar Abbas and Zahedan has a Sikh temple.
The Shahid Beheshti Port in Iran’s Chabahar was equipped and operated by India with the Indian government allocating ₹400 crore as expenditure towards it till financial year 2023-24 and at least half of that amount spent. The port was seen as India’s gateway to trade with Afghanistan (under its earlier President Ashraf Ghani) that could bypass any blockades created by India’s closer neigbour Pakistan.
The master has the ultimate say as to whether or not the ship will undertake a voyage which is potentially unsafe.
— A statement by Norway's insurer Gard
On the day of Ayatollah Khomeini’s assassination, the Ministry of Civil Aviation held a meeting to review India’s aviation preparedness. Modi, who had recently returned from a trip to Israel, chaired a Cabinet Committee on Security meet on 1 March to review the situation in West Asia. On 2 March he spoke with the King of Jordan, the Crown Prince of Saudi Arabia, the King of Bahrain and the Prime Minister of Israel. He condemned attacks on Saudi Arabia and Bahrain, and reaffirmed support for peace, security, and well-being of the people. By 3 March, he had spoken with the Amir of Qatar, the Crown Prince of Kuwait and the Sultan of Oman. Conspicuous by its absence, however, was any call made to Iran or public sympathy by the Prime Minister towards the assassinated leader Ayatollah Khomeini.
International waters
Iris Dena, an Irani Moudge-class destroyer and frigate, docked at an Indian port in February 2026 to take part in MILAN, a multilateral naval exercise hosted by the Indian Navy. Iran had participated in MILAN events in 2022 and 2024. Relations between India and Iran, however, soured in recent times with Iran’s support for causes that were not in line with that of the Indian government. Moreover, Khomeini’s popularity had waned from its peak and the US has accused Iran of having committed atrocities against its own people.
Iris Dena was torpedoed to the bottom of the sea by an American submarine while it was parked in international waters off the Sri Lankan coast, close to India’s borders and within its perceived area of influence. “Frigate Dena, a guest of India’s Navy carrying almost 130 sailors, was struck in international waters without warning,” lamented Seyed Abbas Araghchi, Iran’s foreign minister.
India assisted by sending a vessel to help the sinking warship. But it was only on 5 March that India’s foreign secretary Vikram Misri signed a condolence book at the embassy of the Islamic Republic of Iran, an official gesture. On 6 March External Affairs Minister S. Jaishankar met Iran’s Deputy Foreign Minister Saeed Khatibzadeh at the sidelines of Raisina Dialogue 2026 in New Delhi.
The Indian government’s involvement has all along focussed on controlling spillover events of the war, and aimed at the safety of Indian citizens in these regions. It had asked Indians to leave Iran before the war began. More than 1,200 flights by Indian carriers and 388 flights by foreign carriers have cancelled in the Gulf region since the war started. Indian carriers planned 58 flights on 4 March, including 30 by Indigo and 23 by Air India and Air India Express.
On 2 March, The Department of Commerce held a stakeholder consultation on trade continuity amid geopolitical developments and its potential impact on cargo flows, including the export ecosystem. The consultation was chaired by Special Secretary, Department of Commerce, Suchindra Misra and Director General of Foreign Trade, Lav Agarwal. It was attended by representatives of logistics operators and shipping lines managers, and officers from the Central Board of Indirect Taxes & Customs, Department of Financial Services, Ministry of Petroleum & Natural Gas, Ministry of Ports, Shipping and Waterways and the Reserve Bank of India among others.
Stakeholders presented an assessment of the evolving operational environment, including routing and transit-time changes, vessel scheduling adjustments, container/equipment availability, freight and insurance cost trends, and implications for time-sensitive exports. It was agreed to maintain close coordination for monitoring route and capacity developments, surcharges, and equipment availability.
No minor force
Meanwhile, basmati rice exporters had started to face difficulties, with stocks moving to the ports but unable to be shipped due to rising insurance cost. Disruptions around the Strait had an impact on fertiliser imports from that region too. Rerouting shipments via the Cape of Good Hope is said to add 20-25 days in transit.
On 4 March, the publicly-listed Petronet LNG said that its vessels were unable to safely transit through the Strait of Hormuz to reach Ras Laffan, the loading port of QatarEnergy. Since QatarEnergy, the company’s seller, has issued a notice indicating force majeure, the company also issued corresponding notices to its off-takers, namely GAIL, Indian Oil and Bharat Petroleum, under gas sale and purchase agreements with them.
Gujarat Gas has since issued force majeure notices to its industrial customers and restricted the daily contracted quantity effective from 6 March. Cera Sanitaryware, a faucet and tile manufacturer, said that it had received communication from supplier Sabarmati Gas for restricting gas supply up to 50 per cent of the daily contracted quantity from 6 March till further notice.
Polymer maker Time Technoplast has said that prices have increased by approximately 20 per cent, driven by a surge in global oil and gas prices, as polymers are derivatives of these commodities. Fluctuations in the foreign exchange rates are likely to impact the cost of its input purchases. Freight charges have increased due to changes in global shipping routes and limited availability of marine insurance.
Nisus Finance, which has acquired pre-leased residential assets in the UAE, said that while the situation continues to evolve, the company believes that the fundamental growth drivers of the UAE real estate market remain intact.
Some Indian energy suppliers have been able to diversify their supplier networks. On 5 March, GAIL said that Petronet’s deliveries had reduced to zero and it is assessing the situation and its ability to supply to downstream customers. But since supplies from other sources are unaffected, the potential impact of the ongoing force majeure situation could not be quantified yet.
Mangalore Refineries said that it issued no notices to downstream customers. While IndianOil and BPCL, which also receive supplies from PetronetLNG, have issued no notices either.
The extent of damage and disruption caused by the US-Israel war will depend on the duration of the war, and its ability to meet an objective which is still unclear.
The import of Russian oil and gas to India is likely to give the Indian economy and trade some space to breathe. Broken solutions for the Russia-Ukraine war have pushed to the back, while the US, engaged itself in a war of its own making, has taken front stage.
On 6 March Qatar’s energy minister Saad al-Kaabi told The Financial Times that even if the war ended it would take weeks to months to get back to the normal cycle due to the damages created due to war. “Everybody that has not called for force majeure we expect will do so in the next few days that this continues,” he added.