Amid the Russia-Ukraine conflict not showing any signs of stopping, another war was declared last week – by Israel against Hamas. Israel’s counteroffensive after the surprise attack by Hamas forces now raises fears of a long war in the Middle East, which could hit the already battered global economy further. While the Indian Prime Minister has affirmed solidarity with Israel, the war is not good news for the Indian economy as well.

Israel is a major trade partner of India with our merchandise exports to the tenth-largest overall trade partner amounting to $8.4 billion. Imports from Israel stand at $2.3 billion, resulting in a trade surplus of $6.1 billion. Our major exports to the country include diesel and cut & polished diamonds. Also, the war may impact the India’s ongoing free trade negotiations with Israel. The confrontation may also hit our imports of defence equipment from Israel.

In my last write-up, I expressed concern over India's growing Current Account Deficit along with rupee depreciation and fall is foreign exchange reserves. More importantly, rise in global crude prices can worsen the situation further and now the Israel-Palestine conflict – particularly if it lasts long as claimed by the Israeli Prime Minister and if it inflames tensions in the whole Middle East region – can further deepen the challenges the Indian economy is at present facing.

Ties with the Middle East have become more significant for India in the background of the recently announced India-Middle East-Europe economic corridor, and if the whole Arab world gets involved in the dispute, it will be a complicated scenario from India’s diplomatic point of view. Also, if the ongoing conflict impacts the stability of the West Asian region it will have direct consequences on India’s energy supply and investment inflow.

I invite your opinions.