India Walks a Diplomatic Tightrope

India is walking a tightrope as the Israel–Iran war escalates into June 2025. By urging "de-escalation and dialogue" while refraining from criticizing either side, New Delhi attempts to balance three competing interests: maintaining critical defence trade with Israel, protecting access to discounted oil and key infrastructure projects like Iran's Chabahar Port, and deepening strategic partnerships with the United States and Gulf monarchies. Historically, India and Iran have enjoyed strong cultural and economic ties, notably during periods of Western isolation of Tehran, highlighting India’s traditional preference for nuanced diplomacy. Recent involvement in Chabahar underscores the depth of this partnership.

Simultaneously, since establishing formal diplomatic relations in 1992, Israel has emerged as one of India’s top arms suppliers, delivering drones, radars, and missile systems totaling over $2.9 billion in the past decade. This reflects a subtle diplomatic shift—historically India leaned more explicitly toward Iran or Palestine, but today’s careful neutrality underscores a heightened strategic autonomy.

However, India's carefully calibrated stance faces severe risks if the Strait of Hormuz—a critical artery carrying approximately 20% of global oil trade and nearly 40% of India’s crude imports—experiences disruptions. Brent crude prices have already surged to $78.5 per barrel, and analysts forecast spikes as high as $110 if tensions worsen. With India importing nearly 5 million barrels per day, every additional $10 rise in oil prices increases consumer inflation by roughly 30 basis points. Additionally, India’s economic vulnerabilities include roughly 9 million Indians in Gulf states who remitted a record $129 billion in 2024, potentially jeopardizing livelihoods if regional instability persists.