New Delhi: Europe-bound shipments from India are turning costlier and slower, as global shipping lines avoid the volatile Persian Gulf and Red Sea corridors, forcing vessels to take the longer route around the Cape of Good Hope at the southern tip of South Africa amid escalating US–Iran tensions.
Security concerns around the Strait of Hormuz and the Red Sea–Suez Canal corridor have prompted major carriers to suspend or restrict transits, extending transit times by 10–20 days and raising freight rates by 40–50% on key India–Europe routes, according to industry executives and insurers.
The Cape diversion has added up to 10,000–15,000 nautical miles to voyages, inflating fuel burn, crew and operating expenses that are being passed on to exporters. Hari Radhakrishnan, an expert at the Insurance Brokers Association of India (IBAI), said, “If the conflict prolongs, ships will continue to avoid the Persian Gulf and Red Sea, leading to higher freight and attendant costs. These increases will ultimately be passed on to end customers, as shipping operates on margins of less than 10%.”
Pre-conflict freight from Nhava Sheva in Maharashtra to northern Europe stood at $1,200–$1,850 per container. All-in costs, which means the total cost including base freight, bunker recovery charges and war-risk surcharges, are now estimated to exceed $2,500 per TEU, or twenty-foot equivalent unit, which is the standard measure for a 20-foot shipping container.
The Strait of Hormuz, which handles nearly a fifth of global crude flows, has emerged as a flashpoint after US and Israeli strikes on Iran and retaliatory actions by Tehran. While there has been no formal closure, heightened uncertainty has been enough for carriers to alter schedules and pause sailings.
Shipping majors including Mediterranean Shipping Company and A.P. Moller-Maersk have curtailed Hormuz-linked routes. Maersk has paused future Trans-Suez sailings via Bab el-Mandeb and is rerouting ME11 (Middle East-India to Mediterranean) and MECL (Middle East-India to East Coast US) services around the Cape of Good Hope until further notice.
France-based global container shipping and logistics company CMA CGM has introduced an emergency conflict surcharge of up to $4,000 per container on Gulf-bound cargo.
Insurance shock
Marine insurers have begun repricing risk for voyages transiting high-risk zones. Arti Mulik, chief technical officer at Universal Sompo General Insurance, said that the immediate impact is visible in war-risk covers.
“The current war situation in the Gulf is triggering an immediate surge in war-risk insurance premiums, with costs expected to rise by up to 50% as insurers re-rate the region’s risk profile. There are chances of cancellation of war coverage for shipments to this region,” Mulik said. “Rerouting will inflate freight rates due to extended transit times and higher fuel burn. We are seeing exporters shift towards FOB contracts, transferring mounting logistics and insurance risks to international buyers.”
In free on board (FOB) contracts, the seller’s liability ends once the goods are loaded onto the shipping vessel at the port of origin. After that, the buyer pays for shipping, insurance, and any risks during transit. Exporters often shift to FOB contracts when logistics costs and risks surge.
“…the London market that is the biggest provider of War covers, has issued notices of cancellation of war risk covers under all hull policies starting yesterday (Sunday). War cover cancellations under cargo policies and those by P&I (Protection and Indemnity) Clubs are expected too. The questions that come up are: Will the war cancellation clause get triggered even for vessels that have not sailed yet, but are in various ports in the Persian Gulf? The answer is yes," said Balasundaram R., head - marine insurance at Policybazaar for Business. "Fully laden/unladen tankers inside these ports too will have no war cover after the notice period. Can war cover be reinstated on payment of additional premium? As of now, some London underwriters are offering reinstatement of war cover for this at a very steep price, that may make it totally unviable.”
Gaurav Agarwal of Prudent Insurance Brokers said that the Persian Gulf and Red Sea corridors have been designated high-risk zones for nearly three years. With the latest escalation, the market is assessing whether war-risk rates will rise further, coverage be restricted, or stabilize depending on geopolitical developments. Some reports suggest insurers have invoked force majeure clauses or denied coverage for certain transits.
Trade impact
The disruption has spilled over into air cargo. “Exports of perishables such as fruits, vegetables and meat have nearly halted, with order cancellations rising. Refinery and offshore rig projects in the Middle East involving Indian companies have also paused,” said Dushyant Mulani, chairman of the Federation of Freight Forwarders’ Associations in India (FFFAI). He added that clarity on freight escalation may emerge over the next few days as insurers recalibrate policies.
According to Anil Devli, chief executive of the Indian National Shipowners’ Association (INSA), vessels are currently stranded on both sides of Hormuz. Though not formally closed, Iran has announced over VHF (very high frequency) radio that the strait is shut, while the UK maritime authorities have advised caution. No operator is willing to risk entering a conflict zone. Around seven to eight Indian ships are presently in the region, with authorities coordinating with the Indian Navy’s Information Fusion Centre–Indian Ocean Region. Devli also flagged concerns over spoofing of vessel positioning systems.
For Indian exporters, especially those shipping textiles, engineering goods and chemicals from Nhava Sheva and Gujarat's Mundra port, the prolonged crisis could mean sustained high freight and insurance costs, longer lead times and working capital strain.
“If the contract is linked to shipment from Indian ports, price issues are limited. But if delivery is pegged to arrival at the importer’s port, delays can create price parity concerns,” said Rahul Mehta, chief mentor, Clothing Manufacturers Association of India (CMAI). Mehta noted that some exporters are holding back consignments as transit via the Cape can add around 15 days and alter pricing commitments.
Economists caution that the impact may extend beyond logistics. “Rising Middle East tensions heighten risks of supply chain disruption and higher freight and insurance costs even without a formal blockade,” said Madhavi Arora, chief economist, Emkay Global. However, she added that given the power asymmetry between the US-Israel combine and Iran, markets are hopeful the conflict phase may remain short-lived.
If tensions escalate further, the impact on Jebel Ali Port in Dubai is likely to be slower vessel movement and higher shipping costs rather than a complete shutdown, said trade economist Abhash Kumar. As a major transshipment hub for Indian cargo headed to the Gulf, Africa and Europe, any disruption in Hormuz traffic can delay vessels and raise landed costs of Indian exports routed through Dubai. Buyers may renegotiate prices or defer shipments where contracts are destination-linked, he added.
Over 50% of India’s exports and about 30% of its imports move through the Red Sea route via the Suez Canal, underscoring the scale of exposure to disruptions along the corridor.
Union commerce ministry's region-wise data shows that India exported goods worth $98.81 billion to Europe in FY24, which remained largely flat at $98.44 billion in FY25. Shipments to Africa declined from $45.34 billion in FY24 to $42.70 billion in FY25. In contrast, exports to North America, comprising the US, Canada and Mexico, rose sharply from $86.68 billion in FY24 to $96.49 billion in FY25.
Taken together, exports to Europe, Africa and North America stood at $230.83 billion in FY24 and increased to $237.63 billion in FY25, highlighting the magnitude of trade flows potentially affected by any prolonged disruption in the Red Sea–Suez shipping corridor.
India’s total exports stood at $437.07 billion in FY24 and edged up to $437.70 billion in FY25. Of this, exports to Europe, Africa and North America together accounted for roughly 54.3% of India’s total outbound shipments.