Iran war set to determine India’s trade route to Europe
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India rarely attributes its foreign policy to a single partner or bloc. But war has a way of forcing elections.
The escalating US-Israeli war with Iran is forcing New Delhi to re-evaluate two major trade corridors it has been quietly developing to reduce transit costs and time to Europe, one of its biggest trading partners. It concluded the “mother of all trade agreements.”
One of the routes goes north. International North-South Transport Corridor – a project designed make it easier to transport Indian goods go to Russia, Europe and Central Asia via Iran’s Chabahar Port.
Another runs westward. The India-Middle East-Europe Economic Corridor will connect India to Europe via Gulf ports and Israel’s Haifa Port via rail corridor.
Aerial view of the USS Abraham Lincoln Carrier Strike Group operating in the Arabian Sea, accompanied by two military supply ships and two U.S. Coast Guard vessels, as fighter jets of Carrier Air Wing Nine conduct flight operations in the Arabian Sea, Feb. 6, 2026.
US CENTCOM | Anatolia | Getty Images
As the US-Israeli war against Iran continues in full swing, experts say only one of India’s two major connectivity claims has a realistic future that will support India’s export ambitions: IMEC.
“If Israel and the US win, IMEC will probably be Israel’s choice over Chabahar revival,” said Rafiq Dossani, an economist at US-based think tank RAND.
The IMEC corridor has strong supporters. US President Donald Trump described it as “one of the greatest trade routes in history” during his meeting with Indian Prime Minister Narendra Modi last year.
Israeli Prime Minister Benjamin Netanyahu described the project as “the largest cooperation project in our history” that will change the face of the Middle East.
Iran’s uncertain future is also at the center of the equation shifting in favor of IMEC.
Arguing that the route India follows through Iran is a dead end, Dossani said, “If Iran does not lose the war, it will remain under sanctions. If it loses the war, sanctions may be lifted, but the benefits will be reaped by the winners.” he said.
As Tehran faces fire from US airstrikes, structural realities reinforce pessimism around the Chabahar trade route.
Chietigj Bajpaee, senior research fellow for South Asia at Chatham House, points out that the Chabahar-Zahedan railway, a key component of the INSTC and scheduled for completion in 2026, will likely face “indefinite delays”.
Uncertainty comes on top of doubts surrounding India’s $120 million-plus assets investment at Shahid Beheshti terminal in Chabahar Port, Iran. The US exemption that allows India to operate the terminal despite sanctions is expected to expire this April.
IMEC economics
“IMEC may gain momentum due to INSTC stalling,” Bajpaee said.
While experts have ruled out the possibility of INSTC via Iran, the crisis that has destabilized this route also provides a reason for India to double down on IMEC.
Trade in goods between India and Europe usually takes place via the Suez Canal, but due to disruptions caused by conflicts in the Middle East, ships now have no choice but to take an even longer route via the Cape of Good Hope.
Major carriers have suspended or restricted flights, according to a recent report from Indian newspaper Mint transit It led to a 10-20 day increase in transit times via the Red Sea-Suez Canal and 40%-50% higher freight rates on key India-Europe routes.
“This conflict is about why IMEC is a necessity and [the conflict’s] “The outcome will be a very important factor in shaping how the course of IMEC evolves,” Harsh Pant, vice president of studies and foreign policy at the Observer Research Foundation, told CNBC’s “Inside India.”
IMEC is expected to to reduce Logistics costs have increased by up to 30% and transportation time by 40% compared to traditional routes such as the Suez Canal, India’s commerce and industry minister Piyush Goyal said last year.
“IMEC presents a more significant opportunity,” said Rick Rossow, senior advisor and head of India and emerging Asian economies at US-based policy think tank CSIS, adding that India is “geographically tracking” markets with which it has signed trade agreements.
While IMEC will emerge as the clear winner between India’s two connectivity options, experts warn that its success depends on one crucial element: regional stability – something that is currently in short supply.
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