Before February 28, 2026, roughly 178 ships threaded the Strait of Hormuz on an average day. Within weeks of the US–Israel campaign against Iran and Tehran’s move to choke the waterway, that traffic collapsed by about 95 percent, according to Observer Research Foundation Middle East. When a fifth of the world’s seaborne oil stops moving through a channel barely 21 miles wide at its narrowest, the ripples reach a lot further than the Gulf — including into the calculations of everyone hoping the fallout might, somehow, tilt in South Asia’s favor.
That hope has a tidy logic to it. If the Gulf’s chokepoints seize up and factories keep fleeing China, the thinking goes, some of that displaced trade and production should wash toward India, Bangladesh, and their neighbors. It’s the kind of narrative that gets repeated confidently at policy panels and in LinkedIn think-pieces. The trouble is that the Iran war supply chain story, looked at honestly, cuts the other way first.
Start with the corridors South Asia actually built its bet on. The India–Middle East–Europe Economic Corridor, unveiled with fanfare at the 2023 G20 summit in New Delhi as India’s overland-and-sea route to Europe, runs straight through the region now on fire. War-risk insurance on Hormuz transits jumped from 0.25 percent to 1 percent of a ship’s value, and ORF Middle East projects it could climb to twenty times pre-conflict levels. Cargo doesn’t wait around for that math to settle. As the ORF analysis put it, once carriers reroute, “such route choices, once embedded in carrier contracts and insurance frameworks, become self-reinforcing and difficult to reverse.”
India’s backup plan is in worse shape. The International North–South Transport Corridor, which was supposed to move Indian goods to Russia and Europe through Iran’s Chabahar port, depends on the one country now under sustained American and Israeli strikes. Washington revoked India’s long-standing Chabahar sanctions waiver in September 2025; the February 1 Union Budget allocated nothing to the project; and by spring, reports had India quietly exploring handing its stake in the port’s free-zone entity to an Iranian partner until sanctions ease. Both of New Delhi’s westward routes stalled at the same moment.
Then there’s the part the diaspora feels in its own accounts. Nearly two-thirds of India’s crude oil and half its LNG transit Hormuz, and Brent crude surged roughly 65 percent by the end of March — the sharpest monthly jump on record, per World Bank data. For the millions of South Asian workers stationed across the UAE, Saudi Arabia, Qatar, and Kuwait, a Gulf at war isn’t a shipping-route abstraction; it’s the paycheck that funds a house in Kochi or a wedding in Sylhet. The Kiel Institute’s stress model ranked Bangladesh among the hardest-hit importers anywhere, projecting a nearly 5 percent GDP hit at six weeks of closure. Energy-dependent and remittance-dependent at once, South Asia sits on the wrong side of this ledger.
So where does the optimism come from? From a different, slower story that keeps getting folded into this one. The genuine tailwind is China Plus One — the multi-year corporate migration out of Chinese manufacturing that has US smartphone imports from China falling from 90 percent in 2022 to about 25 percent today, with foreign direct investment into China down 8.6 percent year-on-year. India and Bangladesh sit squarely on the list of destinations soaking up that redirected production, alongside Vietnam and Mexico.
But that shift was underway long before a single missile flew over the Gulf, and it runs on its own logic: tariffs, wages, and political risk, not the Strait of Hormuz. Conflating the two is where the “war benefits South Asia” argument quietly breaks. The conflict is a headwind on the region’s connectivity and its energy bill; the manufacturing migration is a tailwind on its factory floors. They’re not the same lever, and the war isn’t pulling the good one.
What the war does accelerate is diversification away from single chokepoints — and that’s genuinely double-edged for the region. The Trans-Caspian Middle Corridor, threading through Central Asia and dodging both Hormuz and Suez, has seen container traffic climb since the disruption. Trade, in other words, is already finding a way around the Gulf. It’s just not necessarily flowing through the routes India spent a decade and considerable political capital financing.
Whether South Asia ends up a net winner won’t be decided in the Strait of Hormuz at all. It’ll be decided by whether India can convert assembly-line gains into the high-value component-making it still imports from China and South Korea, and whether the region’s connectivity dreams survive a Middle East that has stopped being a reliable neighborhood to build through. For now, the honest answer to the hopeful question is: not yet, and not the way anyone drew it up.
Sources
- ORF Middle East — The Paradox of Resilience: IMEC and the Iran Conflict (June 19, 2026)
- World Bank Blogs — Strait of Hormuz disruption sends oil prices surging (2026)
- Kiel Institute — The Cost of Closing the Strait of Hormuz, Policy Brief (March 2026)
- Modern Diplomacy — India’s Chabahar Port Crisis: US Sanctions and the Iran War (May 29, 2026)
- Organiser — The China Plus One Era: Why global manufacturing is shifting (July 1, 2026)
- Eurasian Times — Iran War Derails India’s IMEC & INSTC Trade Routes
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