Red Sea shipping crisis hits India-Europe trade for 1,000 days

The most exposed markets are the UK, Germany, the Netherlands, Belgium, France, Italy, Spain, Greece, Egypt, Israel, Jordan, North Africa and the US East Coast. The US West Coast is less affected because most cargo travels across the Pacific. Trade with the UAE, Oman and Qatar does not require the Suez Canal, but it still faces higher insurance costs and wider regional security risks, GTRI said.

"At the worst points of the crisis, freight rates on some India-Europe and India-US routes increased by 200-400 per cent," GTRI Founder Ajay Srivastava said. Longer voyages raised fuel, freight, insurance and inventory costs. They also delayed payments and blocked exporters' working capital for additional weeks.

MSME exporters suffered the most, Srivastava said. Goods such as garments, engineering goods, chemicals, leather, carpets, rice, spices, grapes and marine products often carry low profit margins and cannot easily absorb higher freight costs.

The disruption began in November 2023, when Yemen-based Houthi forces started attacking commercial cargo ships in the Red Sea and the Bab el-Mandeb Strait in support of Palestinians amid the Israel-Hamas war. The wider US-Israel-Iran conflict has since added to the uncertainty by threatening other important shipping routes in West Asia, GTRI said.

Military action can intercept missiles but cannot restore commercial confidence, the group said, arguing that the 1,000-day milestone shows shipping disruptions caused by wars can continue longer than business contracts, government support programs and normal inventory cycles.

Srivastava said India should treat maritime insecurity as a recurring risk to international trade, not as a temporary problem. He called for strengthening domestic shipping capacity, trade finance, naval protection and alternative transport corridors.