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This report is from this week’s ‘Inside India’ newsletter which brings you timely and insightful news and market commentary on the emerging powerhouse. Subscribe here.
The big storyIndia rarely ties its foreign policy to a single partner or bloc. But war has the power to force choices.
The escalation of the US-Israeli war against Iran is now forcing New Delhi to re-evaluate the two main trade corridors it had quietly developed to reduce costs and transit times to Europe – one of its largest trading partners, with which it recently finalized the “mother of all trade deals”.
A road goes north. The North-South International Transportation Corridor — a project designed to facilitate the transport of Indian goods to Russia, Europe and Central Asia via the Iranian port of Chabahar.
Another goes west. The India-Middle East-Europe Economic Corridor, which would connect India to Europe via Gulf ports, and the Israeli port of Haifa via a rail corridor.
An aerial view of the USS Abraham Lincoln carrier strike group as it operated in the Arabian Sea, escorted by two military supply ships and two U.S. Coast Guard vessels, as carrier aircraft from Carrier Air Wing Nine conducted flight operations over the Arabian Sea, February 6, 2026.
AMERICAN CENTCOM | Anadolu | Getty Images
As the US-Israel war on Iran rages, experts say only one of India’s two big connectivity bets has a realistic future to support India’s export ambitions: IMEC.
“If Israel and the United States win, IMEC will likely be Israel’s preference over the Chabahar revival,” said Rafiq Dossani, an economist at the US think tank RAND.
The IMEC corridor benefits from powerful support. US President Donald Trump called it “one of the greatest trade routes in history” when meeting Indian Prime Minister Narendra Modi last year.
Israeli Prime Minister Benjamin Netanyahu described it as the “largest cooperation project in our history,” which will change the face of the Middle East.
Iran’s uncertain future is also at the heart of the equation shift in favor of IMECs.
“If Iran does not lose the war, it will remain under sanctions. If it loses the war, the sanctions could be lifted but the benefits will go to the victors,” Dossani said, asserting that India’s route through Iran is a dead end.
As Tehran faces American aerial fire attacksstructural realities reinforce pessimism around the Chabahar trade route.
Chietigj Bajpaee, senior fellow for South Asia at Chatham House, points out that the Chabahar-Zahedan railway – a key part of the INSTC – scheduled for completion in 2026 will likely face “indefinite delays”.
The uncertainty adds to the doubts already surrounding India’s more than $120 million. investment in the Shahid Beheshti terminal of the Iranian port of Chabahar. The American waiver which allowed India to operate the terminal despite sanctions is due to expire next April.
Economy of IMEC“IMEC could gain momentum now that INSTC is stalled,” Bajpaee said.
While experts dismiss the possibility of an INSTC via Iran, the very crisis that is destabilizing this route is also prompting India to redouble its efforts on IMEC.
Trade in goods between India and Europe usually passes through the Suez Canal, but due to disruption caused by the Middle East conflict, ships now have no choice but to take an even longer route via the Cape of Good Hope.
According to a recent report by Indian newspaper Mint, major carriers have suspended or restricted their transit via the Red Sea-Suez Canal, leading to increased transit times of 10-20 days and higher freight rates of 40-50% on major India-Europe routes.
“This conflict has clearly demonstrated why IMEC is a necessity and its [the conflict’s] “The outcome would be a very important factor that would shape the evolving trajectory of IMEC,” Harsh Pant, vice president of studies and foreign policy at the Observer Research Foundation, said on CNBC. “Inside India”.
IMEC should reduce logistics costs up to 30% and transportation time up to 40%, compared to traditional routes like the Suez Canal, Piyush Goyal, India’s commerce and industry minister, said last year.
“IMEC presents a bigger opportunity,” said Rick Rossow, senior adviser and president for India and emerging Asia economy at US-based policy think tank CSIS, adding that it “geographically tracks” the markets with which India signs trade deals.
With IMEC poised to emerge as the big winner between India’s two connectivity bets, experts warn that its success depends on one crucial element: regional stability – something that is currently lacking.
Need to knowRestaurants in India are under threat. India’s Ministry of Petroleum and Natural Gas has ordered oil refineries to to prioritize supply cooking gas to its 330 million homes, risking the operations of more than 3 million businesses that to use it is for commercial purposes.
India hints at a reset of ties with China. India relaxes rules that will allow Chinese investments in the country, marking New Delhi’s desire to booster economic ties with Beijing after nearly six years of friction.
Indian Reliance Industries finances a refinery in the United States President Donald Trump announced Tuesday that the United States will have its first oil refinery in 50 years. finance by the investments of Indian billionaire Mukesh Ambani Trusted Industries.
FutureMarch 12: India consumer inflation data for February.
March 13: RBI weekly update on Indian foreign exchange reserve.
March 16: Wholesale inflation data for February.
March 16: Unemployment rate in India for February.
