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The big story
India rarely ties its foreign policy to a single partner or bloc. But war has a way of forcing choices.
The escalating U.S.–Israel war with Iran is now compelling New Delhi to reassess the two major trade corridors it had been quietly developing to cut transit costs and time to Europe — one of its largest trading partners, with whom it recently finalized the “mother of all trade deals.”
One route runs north. The International North–South Transport Corridor — a project designed to facilitate transport of Indian goods to Russia, Europe and Central Asia via Iran’s Chabahar Port.
Another runs west. The India–Middle East–Europe Economic Corridor, which would link India to Europe through Gulf ports, and Israel’s Haifa Port via a railway corridor.
An aerial view of the USS Abraham Lincoln Carrier Strike Group while operating at the Arabian Sea, escorted by two military replenishment ships and two U.S. Coast Guard vessels, as fighter jets from Carrier Air Wing Nine conducted flight operations overhead in the Arabian Sea, on Feb.6, 2026.
US CENTCOM | Anadolu | Getty Images
As the U.S.-Israel war with Iran rages on, experts say that only one of India’s two grand connectivity bets has a realistic future to support India’s export ambitions: IMEC.
“If Israel and U.S. win, IMEC will likely be Israel’s preference over the revival of Chabahar,” said Rafiq Dossani, an economist at U.S.-based think tank RAND.
The IMEC corridor has powerful backers. U.S. President Donald Trump called it “one of the greatest trade routes in history” during his meeting with Indian Prime Minister Narendra Modi last year.
Israel’s Prime Minister Benjamin Netanyahu has described it as the “largest cooperation project in our history,” that will change the face of Middle East.
Iran’s uncertain future is also central to the equation shifting in favor of IMEC.
“If Iran does not lose the war, it will remain under sanctions. If it does lose the war, the sanctions may be lifted but the benefits will be captured by the winners,” Dossani said arguing that India’s route through Iran is a dead end.
As Tehran faces the fire of U.S. aerial attacks, structural realities are reinforcing pessimism around the Chabahar trade route.
Chietigj Bajpaee, senior research fellow for South Asia at Chatham House, points out that the Chabahar-Zahedan railway — a key component of the INSTC — due for completion in 2026 will likely face “indefinite delays.”
The uncertainty comes on top of doubts already surrounding India’s more than $120 million investment in the Shahid Beheshti terminal at Iran’s Chabahar Port. The U.S. waiver that allowed India to operate the terminal despite sanctions is due to expire this April.
IMEC economics
“IMEC may gain momentum now that the INSTC has stalled,” Bajpaee said.
While experts dismiss the possibility of INSTC via Iran, the very crisis destabilizing this route is also making a case for India to now double down on the IMEC.
Goods trade between India and Europe usually transits via the Suez Canal, but due to the disruptions caused by the conflict in Middle East, ships now have no option but to take an even longer route via Cape of Good Hope.
According to a recent report by Indian newspaper Mint, major carriers have suspended or restricted transit via Red Sea–Suez Canal, which has led to an increase in transit times by 10–20 days and 40%–50% higher freight rates on key India–Europe routes.
“This conflict has made a strong case for why IMEC is a necessity and its [the conflict’s] outcome would be a very important factor shaping how the trajectory of IMEC evolves,” Harsh Pant, vice president of studies and foreign policy at the Observer Research Foundation, said on CNBC’s “Inside India.”
IMEC is expected to reduce logistical costs by up to 30% and transportation time by 40%, as compared to traditional routes like the Suez Canal, Piyush Goyal India’s commerce and industry minister said last year.
“IMEC presents a more significant opportunity,” said Rick Rossow, senior adviser and chair on India and emerging Asia economics at U.S.-based policy think tank CSIS, adding that it “tracks geographically” with the markets with which India is signing trade deals.
While IMEC is set to emerge as a clear winner between India’s two connectivity bets, experts warn that its success hinges on a crucial element: regional stability — something which is in short supply right now.
Need to know
Restaurants in India are under threat. India’s Ministry of Petroleum and Natural Gas has directed oil refineries to prioritize supplying cooking gas to its 330 million households, risking operations of over 3 million businesses that use its for commercial purposes.
India hints at a reset of ties with China. India is easing rules that will allow Chinese investments into the country, in a move that marks New Delhi’s push to boost economic ties with Beijing after nearly six years of friction.
India’s Reliance Industries funds refinery in U.S. President Donald Trump announced Tuesday that the U.S. will get its first oil refinery in 50 years, funded by investments from Indian billionaire Mukesh Ambani’s Reliance Industries.
Coming up
March 12: India consumer inflation data for February.
March 13: Weekly RBI updated on India FX reserve.
March 16: Wholesale inflation data for February.
March 16: India unemployment rate for February.