India’s Prime Minister Narendra Modi is stepping up engagement with Iran as a worsening conflict in West Asia causes severe gas shortages in the country and threatens economic growth, testing New Delhi’s relations with the US.
Modi’s government said Saturday it secured the safe transit of two tankers carrying liquefied petroleum gas through the Strait of Hormuz, which has been all but closed for two weeks after the US and Israel launched airstrikes against Iran. India is among only a few nations, including China and Russia, which has had ships pass through the strait safely since the war began.
‘Damage control’
Although initially remaining silent on the strikes against Iran, India is now intensifying its diplomacy as the fighting worsens and panic spreads to energy and financial markets. India is the second-largest importer of LPG in the world and is suffering acute shortages of the fuel, used in cooking gas and industrial processes. India also imports almost 90 per cent of its oil, so crude prices above $100 will push up inflation and pressure the currency, which is already trading at record lows.
At the same time, New Delhi is trying to manage its relations with the US, a close strategic and economic partner. Earlier this month, the US allowed India to buy Russian oil again, reversing its stance from last year when the Trump administration used tariffs to pressure New Delhi to halt the purchases. The US is India’s biggest export market, and the two sides are negotiating a trade deal to lower tariffs.
“India has been trying to balance its ties both with the US and Iran,” said Nitin Pai, founder of Takshashila Institution, a think tank based in Bengaluru. “Passage of ships from Hormuz indicate that the diplomacy is working.”
Modi’s call with Iranian President Masoud Pezeshkian last week was “damage control” and shows New Delhi is trying to “hedge” its position having earlier faced criticism for appearing to side with the US and Israel, said Pai.
“The government has very clearly decided that it is tilting on the side of the US and Israel,” he said. “That is a strategic bet. But when you take a bet like that you also have to hedge. I think the hedging was not done adequately. That hedging has started now.”
Iranian sailors
India’s Foreign Minister Subrahmanyam Jaishankar spoke to his Iranian counterpart Abbas Araghchi at least four times since the fighting began, while Modi spoke with Iran’s leader on March 12. After the flurry of talks, India announced it secured the safe passage for the two LPG tankers, which had signalled they were Indian government vessels when passing through the strait. Several other vessels remain stuck in the Persian Gulf carrying crude, LPG and liquefied natural gas.
In an interview with the Financial Times on Sunday, Jaishankar said his direct talks with Iran had “yielded some results,” adding that there is no “blanket arrangement” with Tehran for Indian-flagged ships and that “every ship movement is an individual happening.”
New Delhi also agreed to allow about 180 Iranian sailors, who had been docked in the western port city of Kochi, to return to their country. The sailors were aboard the IRIS Lavan when the naval vessel had sought refuge in India because of technical difficulties. A second ship had docked in Sri Lanka, and a third, the IRIS Dena with a crew of more than 100, was destroyed by a US submarine torpedo in the Indian Ocean.
The BRICS test
The first test of New Delhi’s diplomatic tightrope will be in the BRICS forum, which India chairs this year. Iran is a member of the group and wants the organisation to condemn the military action by the US and Israel. That could prove tricky given the expanded BRICS grouping also includes Saudi Arabia and the United Arab Emirates — two nations that have been targeted by Iranian strikes in the conflict.
Randhir Jaiswal, a spokesman for India’s Ministry of External Affairs, said the involvement of the various parties has made it difficult for BRICS to find consensus on the matter.
“Some members of the BRICS are directly involved in the current situation in the West Asia region, which has impacted forging a consensus on a common BRICS position on the ongoing conflict,” he told reporters on Saturday. “As chair of BRICS, India has been facilitating discussions among members through Sherpa channel.”
‘We’re all collateral damage’
Indian officials say the economy can weather the energy crisis, even though there will likely be a short-term hit to output. To cushion the fallout, Finance Minister Nirmala Sitharaman announced a $6.2 billion economic stabilisation fund to give the government additional fiscal headroom to respond. The government is also considering support measures for exporters similar to those rolled out during the Covid pandemic six years ago — such as a moratorium on loan repayments and extending the time that exporters must repatriate their proceeds from overseas sales.
On Friday, Goldman Sachs Group Inc lowered India’s growth forecast for the year to 6.5 per cent from 7 per cent, and predicted inflation will accelerate toward the central bank’s 4 per cent target as crude oil prices soar.
Almost all of India’s exports to countries in the Gulf Cooperation Council — Saudi Arabia, UAE, Qatar, Kuwait, Oman and Bahrain — pass through the Strait of Hormuz, totalling about 14 per cent of India’s total exports. India is also heavily reliant on remittances from its almost 10 million workers in West Asia — accounting for about 40 per cent of India’s total remittance receipts annually, according to Goldman Sachs.
“In this war, we’re all collateral damage,” said Ashok Malik, a partner at the Asia Group. Given India’s close ties with countries in the Gulf, “the fact that their economic interests have suffered in this war has hurt us directly,” he said, through links such as remittances, investments, supply chains, and trade.
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Published on March 16, 2026