Trump's Operation Economic Outcast: How could Iran sanctions impact India? Donald Trump's Operation Economic Outcast could hit India through higher oil prices, trade disruptions, payment hurdles and possible US action over New Delhi's purchases of Russian energy Rimjhim Singh New Delhi Listen to This Article The Trump administration’s 'Operation Economic Outcast', aimed at cutting Iran off from the global economy, could affect India even though New Delhi’s direct trade with Tehran has fallen sharply in recent years.
The US has stepped up economic pressure on Iran after nearly six months of war. The campaign seeks to restrict Iran’s access to oil revenues, shipping, finance and international trade, while also warning countries and companies doing business with Tehran of possible secondary sanctions.
For India, the risks could come not from its limited Iran trade, but from higher oil prices, disruption to shipping and payments, and the wider use of US sanctions against countries dealing with Iran and Russia. India-Iran trade has already fallen sharply India’s direct economic exposure to Iran is much smaller than it was a few years ago.
Indian exports to Iran fell from $3.5 billion in FY2019 to $1.2 billion in FY2026. These exports mainly include rice, tea, medicines, bananas, sugar and pulses, according to data by Global Trade Research Initiative (GTRI). Imports have fallen even more sharply, from $13.
5 billion to less than $375 million, after India largely stopped importing Iranian crude. However, there has been a small recovery in purchases. India bought Iranian crude worth $707 million in April and May under a temporary US waiver, but halted these imports from June.
Also Read Rice remains particularly important. India exported $383.11 million worth of rice to Iran in the first half of 2026, while tea exports stood at $14.34 million. Reuters reported that these shipments have traditionally relied heavily on Dubai for payments and logistics.
Oil shock: A major risk A serious impact could come if the economic warfare further disrupts oil flows through the Strait of Hormuz, a key route for global energy supplies. In a LinkedIn post, Global Trade Research Initiative (GTRI) Founder Ajay Srivastava said, "A Hormuz disruption could sharply raise India’s oil-import bill.
" He said that it could push up crude prices, freight rates and marine insurance costs. For India, which imports most of its crude oil, this could add pressure on inflation and the rupee, Srivastava added. This, he said, creates an unusual situation for India: the country could face a major economic cost from an Iran blockade despite having relatively little trade with Iran.
Dubai disruption could hurt Indian exporters The UAE’s decision to suspend trade and financial transactions with Iran has added another problem for Indian businesses. Indian exporters have traditionally used Dubai as a trading and payment hub for shipments to Iran.
With that channel disrupted, companies may have to find alternative routes and payment mechanisms. This could increase freight, insurance and transaction costs, even for goods such as food and medicines that may receive humanitarian exemptions, Reuters reported.
Exporters are now exploring routes through countries such as Turkey. The impact could be especially significant for the basmati rice industry in northern India. India ships around 5-6 million tonnes of basmati rice overseas each year, of which close to 1 million tonnes go to Iran.
Basmati rice accounted for nearly 60 per cent of India’s $1.3 billion exports to Iran in FY26. Therefore, secondary sanctions could put pressure on supplies to one of their largest markets. Russian oil could create another problem The Iran crisis also intersects with the US pressure on Russia.
The US Senate has passed the Lindsey O. Graham Sanctioning Russia and Iran Act of 2026 by an 86-11 vote. The legislation could allow President Donald Trump to impose tariffs of up to 100 per cent on goods from major buyers of Russian oil and gas. India is among the countries that could fall within its scope.
The bill still needs to clear the US House and become law before such powers can be used. India’s imports of Russian crude rose to a record 2.58 million barrels per day (bpd) in June, supported by tighter supplies from West Asia and lower prices offered by Moscow as demand from China weakened.
As Chinese purchases of crude have fallen sharply, Russia has been selling oil to India at a discount of $2-5 per barrel. This is a shift from the $13-15 per barrel premium Indian refiners paid between March and May, when the conflict began and buyers competed to secure supplies.
Amid the continuing West Asia crisis, Indian refiners have altered their crude procurement mix, raising imports from Russia and turning increasingly to non-traditional suppliers such as Venezuela, Brazil and Angola. The shift is aimed at cushioning the impact of supply disruptions from the region.
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