India’s export-import (EXIM) trade may soon face significant pressure as sea and air freight costs are expected to rise, following renewed tensions in West Asia and persistent global shipping disruptions. The escalating geopolitical crisis involving Iran and Israel has intensified logistical complications that began with the Israel-Gaza conflict in October 2023, further complicating global trade routes and prompting shipping lines to make drastic operational shifts.

At the core of the crisis are the attacks by Iran-backed Houthi militants on commercial vessels navigating through the Red Sea, virtually bringing trade via the Suez Canal to a standstill. In response, major global shipping companies have rerouted vessels through the Cape of Good Hope, which, although safer, adds substantial time and cost to shipping journeys.

These changes are expected to increase India’s sea and air freight costs, a development that could strain logistics networks, impact shipment schedules, and burden exporters with higher marine insurance premiums.

Impact on India’s Export-Import Trade

According to Dushyant Mulani, Chairman of the Federation of Freight Forwarders Associations in India (FFFAI), the alternate route via the Cape of Good Hope will likely affect the timeliness of Indian exports. “The alternate shipping route through Cape of Good Hope is likely to impact the schedules for Indian exporters,” he told ET, highlighting that marine insurance costs may also rise significantly in the near term.

He added that while the exact implications are still emerging, it's evident that shipping and air freight costs may rise, particularly as shipping lines continue to avoid the conflict-ridden West Asian region. Mulani pointed out that a clearer picture would emerge in the coming days, but exporters are already preparing for delays and increased freight bills.

Historical Context: Suez Canal Disruption

The freight rate hike news is not entirely new to Indian traders. Since late 2023, the situation in the Suez Canal—one of the world’s busiest and most critical maritime arteries—has deteriorated. Attacks on cargo vessels have made this route perilous. As a result, many shipping companies rerouted their ships around the Cape of Good Hope, a detour that adds at least 10-15 days of travel time and raises operational expenses.

For India, which relies heavily on maritime trade, especially to markets in Europe, Africa, and the Americas, this shift has already begun to impact logistics schedules and shipping charges.

Air Freight Not Immune to Pressures

While sea freight faces the most direct impact, air freight costs India 2025 are also likely to surge. The volatile regional environment raises aviation insurance premiums, particularly for cargo flights that traverse or bypass Middle Eastern airspace. Airlines may be forced to reroute or reduce cargo capacity, further inflating air freight rates and delaying critical shipments, especially for time-sensitive exports like electronics, textiles, and pharmaceuticals.

Rising Costs for Exporters

The mounting freight and insurance charges are expected to weigh heavily on Indian exporters, especially small and medium enterprises (SMEs) that operate on tighter margins. Mulani emphasized the need for government intervention, suggesting that additional support measures may be required to mitigate rising logistics costs and prevent export competitiveness from being compromised.

This concern is particularly critical for India’s labour-intensive export sectors such as handicrafts, leather goods, garments, and perishable food items, which already face pricing pressure in global markets. Any increase in freight costs will either have to be absorbed by exporters, affecting their profitability, or passed on to buyers, potentially reducing demand.

Insurance Premiums and Shipping Timelines

India maritime insurance cost is also likely to surge, as insurers reassess the risk premiums for shipping through conflict-prone zones. Marine underwriters may demand higher premiums or limit coverage, especially for voyages previously routed through the Red Sea. These added costs will likely be borne by traders, increasing the cost of imports and exports.

Moreover, shipping timelines will be affected significantly. The Cape of Good Hope route adds not just extra sailing time, but also complicates logistics coordination, port scheduling, and downstream supply chain timelines, especially for manufacturers working with just-in-time inventory models.

Government Support May Be Required

Given the evolving crisis, India's export sector may need additional support from the government. This could come in the form of freight subsidies, insurance guarantees, or logistics-related tax reliefs, aimed at maintaining the momentum of outbound shipments.

As India seeks to maintain its competitive edge in global trade, especially in the aftermath of supply chain realignments post-COVID and geopolitical fragmentation, such support will be critical.

Outlook for the Coming Weeks

While it's too early to estimate the exact quantum of freight rate increases, the logistics industry is bracing for impact. Stakeholders across the shipping, freight forwarding, and air cargo sectors are closely monitoring the situation. The Red Sea vessel attacks and the geopolitical escalation between Iran and Israel have added a new layer of uncertainty to an already volatile global shipping ecosystem.

Over the next few weeks, as shipping lines adjust routes, insurance firms recalibrate premiums, and freight forwarders renegotiate contracts, the true cost implications will become clearer.

Conclusion

In conclusion, the India EXIM trade latest news points to a period of increased challenges for exporters and importers. The freight rate hike, stemming from Red Sea tensions and shipping route disruptions, will affect both sea and air cargo logistics. As the Suez Canal remains virtually crippled and more trade moves around the Cape of Good Hope, the impact on cost, time, and competitiveness will be significant.

To safeguard India’s trade resilience, it will be imperative for policymakers and trade associations to work together in supporting exporters, mitigating freight cost pressures, and ensuring that India’s global trade ambitions remain on track, despite these temporary but severe logistical headwinds.

The Upcoming IPOs in this week and coming weeks are HDB Financials, ArisInfra Solutions, Influx Healthtech, Mayasheel Ventures, Eppeltone Engineers, Patil Automation, Samay Projects Services.

The Current active IPO are Oswal Pumps, Aten Papers, Monolithisch India.

Start your Stock Market Journey and Apply in IPO by Opening Free Demat Account in Choice Broking FinX.

Join our Trading with CA Abhay Telegram Channel for regular Stock Market Trading and Investment Calls by CA Abhay Varn - SEBI Registered Research Analyst.