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| Narender Modi |
Meta Description: As the US-Israel-Iran war rages, India faces a diplomatic and economic dilemma. Is New Delhi abandoning strategic autonomy? An expert analysis of the conflict's impact on India's energy security, foreign policy, and future.
The smoke has barely cleared over the Middle East, but the political and economic shockwaves are already being felt thousands of miles away in New Delhi. What began as coordinated US-Israeli strikes on February 28—strikes that reportedly killed Iranian Supreme Leader Ayatollah Ali Khamenei—has erupted into a full-blown regional war, and India finds itself in an increasingly precarious position .
For decades, India has prided itself on maintaining a delicate balancing act in West Asia. It nurtured civilisational ties with Iran, built a strategic defence partnership with Israel, and cultivated economic dependencies with the Gulf monarchies, all while keeping Washington within arm's reach. However, Prime Minister Narendra Modi's recent actions—including a high-profile visit to Israel just before the strikes and a conspicuous silence on the assassination of Khamenei—have raised uncomfortable questions. Has India abandoned its cherished doctrine of strategic autonomy? Is Modi risking the nation's energy security for the sake of a "special relationship" with Tel Aviv and Washington?
This article delves deep into the ongoing conflict, examining how India's economy, diaspora, and diplomatic standing are being tested in what might be the most significant Middle Eastern crisis since the 1973 Yom Kippur War.
The Energy Tightrope: Why Hormuz Keeps Indian Planners Awake at Night
To understand India's vulnerability, one need only look at a maritime map of the Persian Gulf. The Strait of Hormuz, a narrow waterway bordered by Iran and Oman, is the world's most important oil chokepoint. For India, it is an artery.
Nearly half of India's crude oil imports—sourced from Iraq, Saudi Arabia, Kuwait, and the UAE—must pass through this strait . The numbers are staggering. In FY26, approximately 46-50% of India's crude basket originated from the Gulf region, much of it transiting through Hormuz . But the dependency doesn't stop at crude. A staggering 90% of India's LPG imports and over half of its LNG travel through the same volatile waters .
When Iran retaliated against US-Israeli strikes by making the Strait of Hormuz near-impassable, global energy markets reacted with fury. Brent crude surged past $90 a barrel, and analysts warn that a prolonged conflict could send prices spiralling toward $100 or even $200, a level that would be catastrophic for import-dependent economies .
The Economic Domino Effect
For India, the math is brutally simple: higher oil prices mean a wider Current Account Deficit (CAD). Economists estimate that for every $10 increase in the price of oil, India's CAD is affected by approximately $18 billion . Sujan Hajra, Chief Economist at Anand Rathi Group, warns that if crude remains at $100/barrel on a sustained basis, India's CAD could rise by 1.2% of GDP, reaching 2.5-2.7% .
This isn't just a macroeconomic abstraction. A wider CAD puts pressure on the Indian rupee, makes imports more expensive, and fuels inflation. With the government already navigating a complex fiscal landscape, the room to cut excise duties and absorb the shock is limited. As one economist noted, higher crude prices constrain the government's revenue sources, potentially pushing the fiscal deficit above budgeted targets and crowding out private investment .
Modi's Diplomatic Tightrope: Tilting or Balancing?
It is against this backdrop of economic fragility that India's diplomatic moves—or lack thereof—must be judged. And here, the picture becomes murkier.
The Visit That Raised Eyebrows
Just before the joint US-Israeli strikes, PM Modi visited Israel, where the two nations elevated their ties to a "Special Strategic Partnership" and signed 16 MoUs covering defence technology, AI, and cybersecurity . While the Israeli ambassador has insisted the timing was coincidental and the operational decision to strike came after Modi left, the optics were disastrous . As former Indian diplomat Talmiz Ahmad put it, "In moments of significant strategic churn, we do not take sides. You should keep your options open." Modi, he suggested, "followed his heart" rather than strategic prudence .
The Silence That Spoke Volumes
Perhaps more telling than the visit was the silence that followed the assassination of Ayatollah Khamenei. For a nation that has historically valued its ties with Tehran—from the Chabahar Port project to co-operation on Afghanistan—the absence of a formal condolence message from the Prime Minister was deafening . The government's response was limited to Foreign Secretary Vikram Misri signing a condolence book at the Iranian Embassy five days after the war began .
Critics, including former diplomats and opposition leaders, have been scathing. The Congress party accused Modi of "diminishing" India's BRICS presidency by failing to issue a collective statement on the conflict, alleging he is attempting to "appease" US President Donald Trump and preserve his "cozy relationship" with Benjamin Netanyahu . Amitabh Dubey, writing in ThePrint, went further, labelling the actions as "three avoidable blunders" that have "jeopardised India's energy security" and laid bare "the hollowness of his claims to global leadership" .
The Counter-Argument: Pragmatism in Action
However, the government and its supporters argue that this is not a "tilt" but the application of "strategic autonomy" in real-time. They point to the fact that External Affairs Minister S. Jaishankar has held multiple phone calls with his Iranian counterpart, Abbas Araghchi . These discussions yielded a tangible result: Iran allowed at least two India-flagged ships—carrying roughly 92,000 metric tonnes of LPG—to pass through the Strait of Hormuz and dock in Gujarat .
Furthermore, India has been actively engaging with global suppliers to secure alternative sources of LPG and LNG, setting up a 24x7 control room to monitor stock levels . The argument from this perspective is that India is playing a long game: deepening ties with Israel and the US (critical for technology and defence) while maintaining enough of a channel with Tehran to ensure energy flows.
As Veena Sikri, a former diplomat, noted, India's engagements in the Gulf are "vital and core to our interests." She argues that given India's traditionally good relations with Iran, it's unlikely Tehran would "misunderstand" New Delhi's need to reach out to Gulf nations first .
The Great Game: US Pressure and Russian Oil
The conflict has also brutally exposed the transactional nature of global politics, particularly regarding energy.
For over a year, Washington pressured New Delhi to wind down its purchases of discounted Russian crude, even imposing punitive tariffs on Indian exports . India complied, and by January 2026, Russian crude's share of India's import basket had slipped to its lowest since late 2022, while purchases from West Asia surged . This redirection increased India's exposure to the Hormuz chokepoint.
Then came the war. With the strait disrupted and oil prices soaring, the US did an abrupt about-face. It granted India a 30-day sanctions waiver to purchase Russian crude already at sea . Indian refiners have reportedly secured around 30 million barrels under this waiver, with experts estimating that Russia could now meet up to 40% of India's crude requirements if Gulf supplies remain disrupted .
This episode is a masterclass in geopolitical leverage. As an editorial in The Tribune noted, "The speed with which Washington pivoted from penalising India for buying Russian oil to facilitating precisely those very purchases reveals how transactional that pressure was. The US tariff surcharge served as an instrument of leverage, deployed or withdrawn as per US convenience" .
The lesson for India is stark: over-dependence on any single corridor or supplier is a liability. Multi-alignment isn't just a foreign policy buzzword; it is an economic survival strategy.
The Diaspora Dilemma and Regional Stability
Beyond oil and geopolitics, there is a human element. Approximately 10 million Indians live and work in West Asia, sending home billions of dollars in remittances annually . Their safety is paramount. The government has already evacuated 67,000 stranded Indians from the conflict zone, but a prolonged war could destabilise the Gulf monarchies, putting these communities at risk and disrupting a vital source of foreign exchange .
Moreover, the conflict has effectively killed ambitious connectivity projects like the India-Middle East-Europe Economic Corridor (IMEC). As Kabir Taneja of the Observer Research Foundation points out, the October 7 Hamas attack dealt an institutional blow to IMEC, and with the current crisis, "it has been pushed even further to the back of everyone's mind" .
A Role for India as Peacemaker?
Paradoxically, even as India navigates this crisis, voices are emerging that suggest New Delhi is uniquely placed to resolve it. Finland's President Alexander Stubb recently called for India to help broker a ceasefire, joining a chorus that includes former UAE envoy Hussain Hassan Mirza and American political commentator Colonel Douglas MacGregor .
The argument is compelling. India is one of the few major powers with warm, working relationships with Washington, Jerusalem, and Tehran. It lacks the colonial baggage of European powers and, unlike China, is not seen as overtly arming one side . Its legacy as a founding member of the Non-Aligned Movement and its doctrine of strategic autonomy lend it a credibility that other actors lack.
Whether India can seize this moment and transform from a crisis manager into a peacemaker remains to be seen. It would require a level of diplomatic dexterity that goes beyond bilateral phone calls and UN resolution votes. It would require Modi to make that "one phone call" that, as the former UAE envoy suggested, might actually stop the fighting .
Conclusion: Whose Game Is India Playing?
So, has Modi trapped India in Israel's game? The answer, as with most things in geopolitics, is nuanced.
There is undeniable evidence of a tilt. The timing of the Israel visit, the silence on Khamenei's assassination, and the co-sponsoring of a UN resolution condemning Iran's retaliatory strikes suggest a clear bias toward the US-Israel axis. This has come at a cost, straining ties with Tehran and exposing India's energy security to the whims of a volatile region.
Yet, it would be premature to write off Indian diplomacy entirely. The quiet backchannel with Tehran that secured the release of Indian ships, the rapid pivot to Russian oil facilitated by a US waiver, and the ongoing diversification of energy sources all point to a residual pragmatism. India is trying to have its cake and eat it too—deepening its strategic partnership with the West while desperately trying to keep the energy taps open.
The coming weeks will be critical. If the war drags on and oil prices remain elevated, the economic pain will be felt across India, from the fiscal deficit to the household LPG cylinder. If India can leverage its unique position to push for a ceasefire, it might emerge with enhanced credibility.
For now, the nation watches and waits. The Strait of Hormuz remains clogged. The missiles continue to fly. And India, the world's fastest-growing major economy, is learning a hard lesson about the cost of choosing sides in a neighbourhood where it has always claimed to be everyone's friend.
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