Iran is embroiled in massive anti-government protests, sparked off by the worsening economic conditions, with demonstrators across Tehran and other cities calling for economic and political reforms. The Iranian protests are driven by extreme economic privation, including a 70 per cent rise in food prices and 80 per cent inflation. Security forces have intensified crackdowns, and Internet and telecom services have largely been cut off. Over 2,500 people have reportedly been killed in the government crackdown. The atmosphere is rife with talk of American intervention and the possibility of Israel fishing in the troubled waters. But, can the instability in Iran affect India? Of late, India’s relationship with Iran has evolved out of necessity. With Pakistan blocking land access to Afghanistan and Central Asia, Iran had become India’s only workable route to the West. Over time, Tehran also emerged as a strategic balancer – an actor that diluted Pakistani influence and propaganda on Kashmir. It also allowed India to pursue a broader, non-aligned approach in
West Asia. That balancing role has become even more important as India’s strategic options tighten. Bangladesh is facing political uncertainty, Pakistan remains adversarial, China is asserting itself across South and West Asia, and the US under Donald Trump has reintroduced unpredictability into global affairs.
True, India has cultivated strong ties with Sunni Gulf monarchies. But, even under the Bharatiya Janata Party, it has maintained engagement with Tehran. In fact, India has quietly benefited from Iran being the principal Shia power in West Asia. Some diplomatic observers believe that a weakened or marginalised Iran could tilt the region further in one direction, narrowing India’s diplomatic flexibility and complicating relations with competing blocs.
India, Iran and BRICS
As of now, India has issued an advisory to Indian nationals in Iran to leave the country at the earliest. The appeal was aimed at students, pilgrims, business persons and tourists. S. Jaishankar, minister, external affairs, has received a call from his Iranian counterpart, Seyed Abbas Araghchi, and discussed the ‘evolving situation’ around Iran with him. The developments have come even as India was getting ready to host Iran’s President Masoud Pezeshkian for the upcoming BRICS summit, which India will stage this year, as it marks the 75th anniversary of the establishment of India-Iran diplomatic ties. The Iran crisis could stretch the limits of BRICS unity, testing the claims of Prime Minister Narendra Modi at the grouping’s summit in Rio de Janeiro last year that India will give a ‘new form’ to BRICS.
There has been criticism of India’s ‘low-key approach’ with voices like Talmiz Ahmed, former diplomat and West Asia expert, urging New Delhi to reject the possible use of external force against Tehran to protect regional interests. Pro-Iran rallies have been held in parts of the Kashmir valley and Ladakh’s Kargil by the predominant Shia population. “For us, Iranian stability is very, very important,” notes Anil Trigunayat, another former diplomat. “We also have a large population of Shias in India”.
But the real impact will be felt in projects in Iran, where India has invested heavily, to enhance its regional connectivity and energy security. Among the most critical is the Chabahar port, located on Iran’s southeastern coast. The port provides India with a direct route to Afghanistan and Central Asia, bypassing Pakistan, offering a strategic corridor for trade and regional influence. Similarly, the International North-South Transport Corridor (INSTC), a multi-modal network linking India to Russia and Europe via Iran, forms a central pillar of India’s regional trade strategy, reducing reliance on longer maritime routes.
Chabahar project under threat
India is exploring several options to retain its presence at the Chabahar port in the face of increasing US pressure on Iran. India had delivered on its commitment to provide $120 million to develop the port under a 20-year agreement signed with Iran in May 2024 for long-term operations at Shahid Beheshti terminal. Under the agreement, this amount was to be used for further equipping Shahid Beheshti terminal, including procuring equipment such as mobile harbour cranes, rail-mounted quay cranes, forklifts and pneumatic unloaders. But the port came under US sanctions. A six-month exemption from the sanctions by the Trump administration runs out in April. To reduce the exposure of state-run entities and officials to those sanctions, all Indian government officials serving on the board of India Ports Global Limited, the state-owned entity that took over operations at the Shahid Beheshti terminal in 2018, have resigned from their positions.
Even if India gets a reprieve of sorts, prolonged instability in Tehran could slow operations at Chabahar, disrupt trade flows along the INSTC and compromise India’s broader regional engagement plans. This makes Iran’s political and economic health directly relevant to India’s strategic and commercial interests. Beyond individual projects, Iran’s instability can affect India’s broader trade and logistics ecosystem. Delays at ports, customs slowdowns or infrastructure disruptions could ripple across supply chains connecting India to Central Asia, Russia and Europe.
Gulf states worried
The big question is what options can the US administration exercise – and what impact will that have on India’s diplomatic approach towards a possible escalation. Major Gulf states have expressed their disapproval of any US action, warning that such an intervention could trigger economic and political instability across the region. Saudi Arabia, joined by Oman and Qatar, has been privately lobbying the Trump administration after the White House asked them to prepare for possible action against Tehran.
According to Arab Gulf officials, any military effort to topple Iran’s regime could severely disrupt global oil shipments through the Strait of Hormuz, which is a strategic waterway through which about 20 per cent of the world’s oil supply passes. They fear domestic blowback, economic setbacks and potential retaliation if US forces act. Saudi Arabia, for instance, is focused on its Vision 2030 plan to diversify its economy and views regional calm as essential. Analysts suggest the Gulf’s preferred outcome would be domestic reforms in Iran, rather than regime collapse (as Donald Trump engineered in Venezuela).
Tariff shadow over India
For India, it is a tightrope walk. India’s ties with Iran have come under renewed pressure from the US after Trump’s announcement that ‘any country’ having trade ties with Iran would face a 25 per cent tariff if it sought to do business with the US. India may have to scale down its trade with Iran, pegged at a measly $1.6 billion, further in the current financial year.
However, the levies over Iran are expected to have ‘minimal impact’ on India. Iran doesn’t figure among India’s top 50 global trading partners. India’s total trade with Iran during 2024-25 was 0.15 per cent of the country’s total trade, with imports from Iran amounting to $0.44 billion.
India stopped importing oil from Iran – once the main commodity in the two-way trade – in May 2019, because of sanctions imposed by Trump in his first term. This resulted in two-way trade plummeting from $17.03 billion in 2018-19 to the current low levels.
Basmati rice exports
However, the civil unrest in Iran has started impacting our basmati rice exports to the country, leading to a sharp fall in domestic prices, as exporters face payment delays and mounting uncertainties. The Indian Rice Exporters Federation (IREF) has urged exporters to reassess risks on Iranian contracts and adopt secured payment mechanisms, warning against over-leveraging inventories meant for the Iranian market.
India exported $468.10 million worth of basmati rice to Iran during April-November of 2025-26, totalling 599,000 tonnes. Iran is India’s top basmati rice export destination, but the current financial year has seen growing stress on order flows, payment cycles and shipment schedules due to the prevailing instability.
The impact is now clearly visible in domestic mandis. Over the past week alone, prices of key basmati varieties have registered a steep decline, reflecting buyer hesitation, delayed contracts and heightened risk perception among exporters.
The domestic price of basmati rice variety 1121 has come down to Rs80 per kg from Rs85 per kg last week, while varieties 1509 and 1718 declined to Rs65 per kg from Rs70 per kg.
“Iran has historically been a pillar market for Indian basmati; however, the current internal turmoil has disrupted trade channels, slowed payments and dented buyer confidence,” Prem Garg, IREF National president, said in a statement. Exporters must exercise heightened caution, particularly with respect to credit exposure and shipment timelines, he added. Importers have conveyed their inability to honour existing commitments and remit payments to India.
IREF has issued an advisory and appealed to stakeholders to diversify into alternative markets across West Asia, Africa and Europe to cushion any prolonged slowdown in Iran-bound shipments. “We are not sounding an alarm, but urging prudence,” Garg noted. “In periods of geopolitical and internal instability, trade is often the first casualty. A calibrated approach is essential to protect both exporters and farmers”.
The federation also addressed concerns over the recent remarks by US President Trump, indicating that countries continuing trade with Iran may face a 25 per cent tariff. IREF clarified that Indian rice exports to the US are already subject to a 50 per cent tariff, up from 10 per cent earlier.
Despite this, Indian rice exports to the US have remained resilient. India exported 240,518 tonnes of Basmati and non-Basmati rice to the US during April-November 2025-26, compared to 235,554 tonnes in the entire 2024-25. The US is the 10th largest market for Indian rice globally and the fourth largest for Basmat rice. “There is limited clarity on whether the proposed 25 per cent tariff would be levied over and above the existing 50 per cent duty,” the federation noted, adding that it does not foresee a significant decline in exports, even if tariffs rise further, given the unique position of Indian Basmati in global markets.
However, IREF expressed greater concern over developments in Iran, where disruptions in local markets have affected trade settlements. Importers have conveyed their inability to honour commitments and remit payments to India, creating heightened uncertainty. While similar crises have occurred in the past, the trajectory of the current situation remains unclear and is expected to cause further disturbances in prices, liquidity, and trade sentiment in the weeks ahead, the federation added.
Tea exports could be hit
Apart from rice exports, Indian tea exporters are worried about the Iran crisis as shipments to the country, a major overseas market for them, have been halted due to a total breakdown in communication with importers. Iran is mostly a premium-quality orthodox tea market, where Assam orthodox tea finds its place in many Iranian brands.
“As of now, there is absolutely no contact with Iran,” says Anish Bhansali, partner of Bhansali & Co, a major tea exporter to Iran. “All phone lines have been lost. So, trouble is an understatement as of now. We will only know what the issue is once we start talking to our clients there. The situation is definitely not good”.
“What impact will it have on our exports – that is something we need to ask them. Some of the shipments are already on their way based on prior contracts. Some are still waiting to depart. We have stopped shipments for the moment. Currently, the situation is worrisome,” adds Bhansali.
West Asia has been a top export market for Indian teas. During January-November last year, tea exports to Iran and Iraq were at 10 million kg (mkg) and 49 mkg, respectively. During this period, shipments to the United Arab Emirates stood at 45 mkg. Significantly, a major part of the exports to the UAE is destined for Iran.
“Iran tea exports are basically based on forward contracts,” says Sujit Patra, former secretary, Indian Tea Association (ITA). “According to these contracts, tea is already procured by the importers. Now, due to these geopolitical disturbances, shipments may be affected. But it will have an intermittent effect. Iran is mostly a premium quality orthodox market,” Patra adds. “Indian tea is well entrenched among the Iranian tea brands. Indian tea exports will find their own way into Iran”.
Notably, buoyed by higher shipments to Iran, Iraq and China, India’s total tea export in 2025 is expected to grow significantly, compared to 2024. The country had exported 256.17 mkg of the brew in 2024.
High stakes for India
As for India’s stakes in the Iran situation, Trigunayat, a former diplomat, says: “India wants stability and security in the region. For us, Iranian stability is very, very important. We also have a large population of Shias in India. Both the Chabahar port and the INSTC are critical objectives and projects for India.”
Highlighting the risks posed by continued unrest, he adds: “If there is definite, continued volatility for prolonged periods in Iran, that will adversely impact our own interests. So, I think that India will also be taking into account all these factors and the way things are playing out. New Delhi wants to ensure that trade and regional connectivity continue smoothly. Any significant disruption in Iran, especially if infrastructure or ports are affected, will have direct ramifications for India’s regional logistics and economic engagement.”
This is particularly critical as India works to expand its footprint in Eurasian trade, integrate its markets with West Asia and secure alternative transport routes. A volatile Iran could mean longer transit times, higher costs and uncertainty for Indian exporters and importers, directly impacting businesses and regional investments.
China’s growing influence
With Venezuela largely unavailable as an oil partner, China has been strengthening its relationship with Iran, increasing oil imports and projecting influence in the region. India’s continued leverage and historical ties with India have prevented China’s total dominance so far. Diplomats who have served in the region aver that Iranians want to spread their friendships across the aisle. “That is why they are keen to talk to India, to remain a strategic partner, because of the civilisational connect that we have,” they add.
Given the complex dynamics, India feels it should pursue quiet diplomacy rather than overt alignment, focusing on stabilisation and de-escalation. But will such a strategy work in the long run if Trump ratchets his threats? It is not that Iran is a small country or totally ineffective. Nor has it been defanged by the recent war with Israel. It is still very strong. Any war or conflict there can destabilise the whole region, directly impacting India – energy security will be affected, the welfare of our diaspora will be in question, and economic engagement will be disrupted.
The coming days are crucial, but the view in New Delhi is that the regime is likely to survive this time. In a Trumpian world, India will have to navigate a complex geopolitical landscape, balancing China’s growing influence in Iran with its own historical ties.