How Israel-Hamas conflict could threaten Indias economic interests
Adani Ports shares saw a 5 per cent drop on Monday owing to disruptions at Haifa Port caused by the Israel-Hamas conflict. Representational image

How Israel-Hamas conflict could threaten India's economic interests

Impact could be felt in bilateral trade ties with Israel, crude-dependent sectors, Adani port project, among others

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As the Israel-Hamas conflict escalates, the repercussions threaten to upend India's delicate balance of trade, commercial, and economic interests with the Middle East that it has methodically developed over decades.

India relies heavily on crude oil, and any price increase could exacerbate inflation fears. Nearly 60 per cent of India's crude oil demand is met by this region. An uncertain Middle East could cause supply interruptions, driving up global oil costs. India imports more than 80 per cent of its crude oil needs.

Oil price increases can exacerbate the country's current account deficit, putting downward pressure on the currency. A weakening rupee raises the cost of imports, exacerbating inflation.

India-Israel partnership

Furthermore, Israel has emerged as India's key trading and investment partner. The increasing commercial partnership, worth around $5 billion, includes a variety of industries. Disruptions in this trade as a result of geopolitical uncertainty can have an impact on firms on both sides. For example, the lucrative diamond trade between Surat and Tel Aviv may be affected. Similarly, collaboration in water technologies and cybersecurity may be hampered.

Recent inflation rates, while dropping, remain over the Reserve Bank of India's maximum limit of 6 per cent. Rising energy costs are already putting a strain on many Indian industries, and further increases in crude oil prices would just exacerbate the problem.

India and Israel have a strong commercial relationship. Israel is India's third-largest trading partner in Asia and tenth globally. Bilateral trade has developed to encompass pharmaceuticals, agriculture, information technology, telecommunications, and water management.

India exports to Israel precious stones, metals, chemicals, and textiles. In exchange, Israel supplies India pearls, precious stones, chemicals, mineral/fertiliser goods, machinery, electrical equipment, petroleum oils, and defence and transportation equipment.

Adani Ports could take a hit

Adani Ports' shares saw a 5 per cent drop on Monday owing to disruptions at Haifa Port caused by the Israel-Hamas conflict. Adani owns 70 per cent of this port. Capital markets and investment group CLSA, on the other hand, sees this as a potential purchasing opportunity, given that Haifa's contribution to Adani Ports' overall volumes is now only about 3 per cent.

Among all Adani group shares, this particular stock has the highest regard among institutional investors. This esteem is attributed to both the nature of the business and its consistent operational performance, even amidst challenges faced by the group.

“We are closely monitoring the action on the ground concentrated in South Israel, whereas Haifa port is situated in the North. We have taken measures to ensure the safety of our employees, and all of them are safe. We remain fully alert and prepared with a business continuity plan that will enable us to respond effectively to any eventuality,” a spokesperson for Adani Ports & SEZ Ltd said.

The overall contribution of Haifa in APSEZ’s numbers is relatively small at 3 per cent of the total cargo volume.

"For the current financial year (Apr 23-Mar 24), we have guided for Haifa Cargo volumes range of 10-12 MMT and APSEZ’s total cargo volume guidance of 370-390 MMT. In the initial six months (Apr-Sep 23), APSEZ’s total cargo volume was ~203 MMT, of which the Haifa share is ~6 MMT. We stay confident of APSEZ's business performance," the spokesperson added.

In the immediate aftermath of any flare-up, there might be logistical challenges. Due to security concerns, Israel's ports, airports, and other transport facilities might face operational disruptions. Several flights between the two countries have already been suspended.

Trade dynamics (data sourced from the Embassy of Israel website)

In 1992, bilateral merchandise trade was valued at US$ 200 million, largely dominated by diamond

By FY 2022-23, this figure surged to $10.1 billion (excluding defence). Interestingly, the trade balance tilted in India's favour

India's exports to Israel: $ 7.89 billion

Israel's exports to India: $ 2.13 billion

Additionally, bilateral trade in services in 2021 stood at 1.1 billion.

India ranks as Israel’s second-largest trading partner in Asia and seventh-largest globally.

While diamonds, petroleum products, and chemicals predominantly constitute their trade, there's a noticeable uptick in electronic machinery, high-tech products, communication systems, and medical equipment.


India to Israel: Pearls and precious stones, automotive diesel, chemical and mineral products, machinery and electrical equipment, plastics, textiles, apparel, base metals, transport equipment, and agricultural products.

Israel to India: Pearls and precious stones, chemical and mineral/fertiliser products, machinery and electrical equipment, petroleum oils, defence, and transport equipment.


From April 2000 to May 2023, India invested $ 383 million in Israel. Indian giants like TCS, State Bank of India, Jain Irrigation, Sun Pharma, Infosys, Tech Mahindra, and Wipro have made substantial investments in Israel through acquisitions and branch openings.

In contrast, Israel's direct FDI into India from April 2000 to March 2023 was $ 284.96 million. Over 300 Israeli investments exist in India, spanning high-tech, agriculture, and water sectors. Teva Pharmaceuticals, Ecoppia, and Tower Semiconductor are among the top Israeli firms with significant investments in India.


The year 2017 saw the signing of seven MoUs in fields like innovation, technology, water, agriculture, and space & science when Indian Prime Minister visited Israel. A joint fund of $40 million was also established for R&D and technological innovation.

The subsequent visit of the Israeli Prime Minister to India in 2018 resulted in the signing of nine agreements in sectors ranging from cybersecurity to film production.

Agriculture has been a crucial area of cooperation, with 30 Centers of Excellence operating across twelve Indian states. These centres focus on various agricultural techniques and practices, and many Indian officials receive training in Israel.

In water technologies, the two nations have prioritised joint efforts in water management and conservation. Israeli firms have built desalination plants in India, and both countries collaborate on various water projects.

R&D and innovation

The India-Israel Initiative for Industrial R&D (i4RD) was set up in 2005 to bolster joint industrial R&D projects.

The India-Israel Industrial R&D and Innovation Fund (I4F) was signed in 2017 with contributions of US$ 20 million from each side to stimulate further R&D in sectors like agriculture, water, and healthcare. The Apollo-Zebra Medical project is a notable outcome of this collaboration.

Post-2020 agreements

In September 2020, Israel’s Start-Up Nation Central and India’s iCreate inked an MoU to accelerate innovation and tech cooperation between start-ups from both countries.

In December 2020, both nations signed an Agreement on Cooperation in Health and Medicine, emphasising mutual support during the COVID-19 pandemic.

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