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Israel-Iran Escalation: What’s at Stake for South Asia?

An Israeli attack on Iran on Friday could profoundly impact South Asia's geopolitical, economic, and security dynamics, experts have said.
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The region, encompassing nuclear-armed states like India and Pakistan, is highly sensitive to Middle Eastern instability due to energy dependencies, diaspora ties, and strategic alignments.

"Economically, South Asia relies heavily on Gulf oil and gas. Iran, a key supplier for India, could face disrupted exports..., spiking global energy prices. India, importing 80% of its oil, would face inflationary pressures, straining its economy. Pakistan, already grappling with fiscal challenges, could see exacerbated energy shortages, deepening domestic unrest," Dr. Shubhda Chaudhary, who is the founder of the New Delhi-based Middle East Insights Platform, told Sputnik India.

Following Israel's strikes on Iran, including its nuclear facilities, India's stock market plunged almost 800 points. At the same time, global oil prices surged nearly 9 percent, with Brent crude trading at $78 a barrel.
Geopolitically, the conflict could intensify India-Pakistan tensions. India's defence ties with Israel, a major arms supplier, contrast with Pakistan's historical sympathy for Iran and shared border concerns, she added.
Israel's airstrikes on Iranian facilities might push Pakistan closer to Iran, potentially reviving Tehran's influence in Afghanistan, complicating India's Central Asian outreach, the geopolitical expert reckoned.
Diplomatically, India's neutral stance on Iran-Israel tensions would be tested, balancing ties with Israel, the US, and Gulf states against its Chabahar port investment in Iran. "Pakistan might leverage anti-Israel sentiment to bolster domestic legitimacy, complicating regional de-escalation," she underlined.
While India could capitalise on diplomatic mediation, the risks—economic shocks, heightened rivalry, and security threats—outweigh potential gains, threatening "South Asia's fragile stability", the think tanker stressed.
Besides, India has, on the question of Israeli airstrikes to obliterate Iran's nuclear arsenal, taken a detached approach ever since it voted in favour of sanctions imposed on the Islamic Republic of Iran (IRI) in December 2006.

"New Delhi's contention then was not to appease Washington but a principled stance in that Iran, a Nuclear Non-Proliferation Treaty (NPT) signatory, had violated it by enriching weapons-grade uranium for a bomb. India had never signed it, so the question of hypocrisy, sometimes leveled against it, is untenable," Burzine Waghmar, a member of the Centre for Iranian Studies at the School of Oriental and African Studies (SOAS) in London, said in an interview with Sputnik India.

India will steadfastly avoid condemning Israel, as borne out when retaliatory airstrikes were launched by it on Iran in April and October 2024. South Asian mass reaction, so typical of anti-western posturing, may lead to the usual noises on the street or social media, the scholar suggested.
Furthermore, a Strait of Hormuz blockage or new sanctions on Iran would trigger economic shocks (oil price spikes, inflation), strategic setbacks (Chabahar disruption), and security threats (terrorism, regional rivalry) for India, Chaudhary pointed out.
India, the world's third-largest oil importer, imported 232 million metric tonnes (MMT) of crude oil in 2023–24, with over 80% sourced from the Middle East, including Iran. The Strait of Hormuz, a chokepoint for 21% of global oil trade (21 million barrels per day in 2022), is critical for these imports, she explained.

"A blockage could halt flows from Iran, Iraq, Saudi Arabia, and others, potentially reducing global supply by 20–30%. Oil prices could surge to $100–150 per barrel, far exceeding the $109 peak post-2011 Iranian threats. India's oil import bill, $132 billion in 2023–24, would skyrocket, fueling inflation and straining its trade balance. Liquefied natural gas (LNG) prices, vital for India's energy mix, would also spike, as Qatar's exports pass through the Strait," the strategic affairs pundit emphasised.

India's $370 million, 10-year agreement to develop Iran's Chabahar port (signed May 2024) supports trade with Afghanistan and Central Asia, bypassing Pakistan. New US sanctions on Iran could jeopardise this investment, as warned by Washington in 2024. A Strait blockade would disrupt Chabahar's operations, undermining India's strategic outreach and the Turkmenistan–Afghanistan–Pakistan–India (TAPI) pipeline project, Chaudhary stated.
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