Impact of Iran-Israel War on Indian Exports to Iran

India’s exports to Iran are now facing serious uncertainty because of the escalating conflict between Iran and the US-Israel Joint Force.

Iran has been an important market for Indian goods. In 2024, India exported products worth about 1.25 billion dollars to Iran. Indian exports include basmati rice, tea, sugar, pharmaceuticals, and electrical machinery.

But this war has disrupted these trade flows. Hundreds of thousands of tonnes of Indian basmati rice are currently stuck at ports or in transit, as shipping routes and insurance coverage have been disrupted.

Possibility of De-dollarization and its impact on the World

There has been a lot of hue and cry about De-dollarization post reckless tariffs imposed by the Trump Administration, but de-dollarization is still in the realm of rhetoric, and not in reality. The demand for US bonds is increasing, especially in the wake of the rise in geopolitical tensions and uncertainty.

Dollar's Enduring Dominance

The US dollar is the most dominant reserve currency in the world. It constitutes 58% of the total reserves. Presently, nearly 90% of the total Forex transactions are denominated in the US dollar. This is a position that has remained unchanged since the Bretton Woods agreement. Statistics indicate that the total amount of US bonds held by foreign countries has hit a record high of nearly $9.4 trillion by the end of 2025. Japan remains the largest creditor at $1.2 trillion end-2025, unchanged from 2020 levels, with many countries like the UK have increased their dollar holdings. De-dollarization efforts by the BRICS countries, fuelled by China and buzz-town in India, like the RBI's efforts to link digital currencies seems more like a media creation, and the efforts are yet to come to fruition. However, on the other hand, the policies adopted by President Trump are increasing the chances of diversification, fuelling the speculation about de-dollarization.

Iran is Strategically Less Important than UAE and Suadi Arabia for India

Every country in the world strives to maintain good relations with almost all countries, just as we strive to maintain good relations with our neighbors and relatives. However, when it comes to protecting interests and choosing partners among many, a country strives to maintain good relations with the country with which it has the greatest interest. A country that provides the lowest value is not significant and receives the last preference. India has relations with almost all the Middle East countries based on people migration and mutual trade.

Let's first talk about people. According to the Overseas Indians data of the Ministry of External Affairs of India, a large number of Indian citizens live and work in the Gulf and surrounding countries. This total number reaches around 9 million. Currently, the largest number of Indians are in the United Arab Emirates, with approximately 3,554,274. This is followed by Saudi Arabia, with 2,460,603 Indians. There are 9,93,284 Indians settled in Kuwait, 8,35,175 in Qatar and 3,23,908 in Bahrain. 6,84,771 Indians live in Oman. There are about 20,000 Indians in Israel. 16,897 Indian citizens live in Jordan, 17,100 in Iraq and 10,320 in Iran. Around 3,000 Indian citizens are registered in Lebanon, 3,141 in Egypt, 700 in Yemen, 97 in Syria and 11 in Palestine.

Middle East Crisis: It's Judicious Time than to Respond in Haste

Post the killing of Iran's Supreme Leader Ayatollah Ali Khamenei and his family in a US-Israeli led joint attack, the second phase of the US-led regime change effort in Iran has moved to the next stage. The first phase was to cause an internal protest against the Khamenei regime that had been gaining momentum in urban and rural Iran for months stirring Irani citizens in and outside Iran. Now, in the third phase, Iran's former dynasty, the Pahlavi dynasty, which still enjoys considerable support in Iran, will likely emerge in a leaderless Iran.

There is a claim that there is a three layered succession plan and Khamenei’s son me take over as final the Supreme Leader of Iran. However, this doesn’t sound fullproof. Ayatollah Khomeini was not father of Ali Khamenei as popularily believed. So even if there is a line of succession, there will be conflicts in absence of strong leadership. This will further worsen Iran's internal situation even, and the IRGC will be unable to control the situation even if it wishes to. It is quite possible that there will be internal conflict in the ranks and files of IRGC and it will possibly lead to collapse and split in the IRGC and a fanfiction being promoted by the US on the line of Taliban. It is quite possible post chaos, there will a factional which will try to capture Tehran the way Taliban did in Afghanistan.

Upset Over Narendra Modi's Israel Visit

India's secular intellectuals and media houses are outraged by the fact that Prime Minister Narendra Modi visited Israel. More than the Prime Minister's visit, they are upset by the fact that in his speech, the Prime Minister referred to Hamas as terrorist organization and the October 7th Hamas attack as a terrorist attack. Their displeasure is further compounded by the fact that the Prime Minister has agreed to several cooperation agreements to give a new dimension to India-Israel relations.

Well!

These people argue that India has changed its policy direction on the Palestine issue. India has always supported Palestine on the Palestine issue, but now India has retreated from that policy. These intellectuals continue to call this change in direction wrong.

Well, if this is the argument, then one question must be asked: what has India gained as a result of this one-sided support to Palestine?

Let's assume that Palestine is very poor and facing hardship. It has no technology or any special scientific achievements that could benefit India. No problem. Then, Palestine can at least support India on international forums and refrain from making negative comments on India's internal issues. India can certainly expect this much, and it's justified. But what is the reality?

Budget 2026 Calls for Stability in the Stock Market over Speculation

This is not a budget that aimed to kick-start the markets through speculative trading cycles or provides instant gratification to equity markets. Rather, it is a budget that has its heart set on long-term capital formation, real-sector productivity; focus on key areas of the future economy and a consequent rebalancing of the growth model in India to move away from the dangers of over-financialization.

The government has proposed an increase in the Security Transaction Tax (STT) on futures and options trading in the stock market in the Union Budget 2026. STT on futures has been increased from 0.02 per cent to 0.05 per cent, a 150 per cent increase over the existing rate. Similarly, on option trading, there is an increase from 0.1 per cent to 0.15 per cent on the sale of options (premium) and 0.125 per cent to 0.15 per cent on the sale of options(exercised). This triggered a sudden sell-off on Dalal Street on February 1, 2026, the Budget Day, following an increase in STT. This response by the market, at first, may seem to be counterintuitive but is, in fact, completely expected and in line with the long-term goals of the economy and the self-sufficiency of the stock market.

 
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Is This the Bottom or Crypto Winter 2.0

Bitcoin is trading around $63,000 for some time in February 2026. This is down more than 50% from its peak of $126,000 in October 2025. Many are asking whether this is a cycle bottom or the start of Crypto Winter 2.0. If one looks at the patterns will notice fundamental changes in the position of Bitcoin in the market. This calls for prudence.

The price of Bitcoin is currently around $63,218, and the total market cap of crypto has fallen below $2.3 trillion. The prices even touch $62,700. Platforms like CryptoQuant indicates that the crypto bearish, with BTC below its one-year moving average. It seems that the prices of Bitcoin may further fall.

Crypto Winter 2.0

The current situation in the crypto market looks like previous winters, which saw 70-85% corrections, low trading volume, and capitulation events, such as those in 2018 or 2022, which lasted for 12 months. Along with the selling pressure, macroeconomic headwinds are also causing problems for the cryptocurrencies. The Fed rate is expected to range 3.5% to 3.75%. It is enough to suppress risk appetite. Apart from this, Trump’s policies are also resulting in regulatory uncertainty despite Trump’s pro-crypto policies. If black swans such as rate hike or global economic crisis or even slowdown hit the economy, Bitcoin will become weaker leading to fall in volume which would freeze the market.

Trump's Tariff, the US Supreme Court and Its Impact on India

The US Supreme Court held that Trump could not impose general tariffs during peacetime under the International Emergency Economic Powers Act (IEEPA). IEEPA was the legal basis for the 18% reciprocal tariff on India and tariffs on other countries. This ruling by the US Supreme Court has effectively struck down the legal basis for the higher rate. India was paying only the standard MFN-style tariffs of 3.5% before Trump’s tariffs. This was a setback for President Trump, but the Trump Administration acted quickly to invoke Section 122 of the US trade law. This little-used provision allows the president to impose tariffs of up to 15% for 150 days, after which Congress must authorise an extension. Under the new rules, a flat 15% tariff is now applied to imports from all countries, including India, from February 24, 2026.

What has Changed Post the Court’s Ruling

The recent announcement by Donald Trump of a 15% “global” tariff on all countries, which came immediately after the US Supreme Court invalidated his previous tariffs imposed on an emergency basis, has upset the trade math calculations for India. What this means for India is that the earlier agreed-upon 18% reciprocal tariff, which was part of the Trump-Modi trade agreement, is now legally dubious, and in its place, a temporary 15% tariff will be imposed on Indian exports to the United States. The impact of this new development is that India will now be faced with a tariff rate that is lower than the 18% rate that was originally agreed to, but higher than the pre-Trump MFN rate of 3.5%.

India Joins Pax Silica

Until recently, it seemed that India was a thorn in America's eyes! However, today, the same America has made India a part of the US-led "Pax Silica" alliance! It may seem surprising to the average person, but this is how the world of diplomacy works. Every transaction here has a single objective: protecting the country's interests, and there are no friends or enemies.

The Pax Silica Alliance, though still evolving' is a US-led coalition focused on securing the global supply chain for essential minerals, semiconductors, and AI. India's participation in this alliance is important for both India and the US. America possesses AI technology, while India has a huge market for AI. So mutually beneficial for both.

Essentially, Pax Silica aims to create a trusted ecosystem from mining to microchips and from microchips to AI, reducing excessive dependence on a single dominant supplier. It also aims to reshape 21st-century technology-based geopolitics. However, it is implicitly a US effort to counter China's growing dominance in microchips and AI.

Indian IT Stocks have Tough Time Ahead

The stocks of Indian IT companies are bleeding following the launch of Anthropic, a new Artificial Intelligence (AI) model. The prices of stocks of Indian IT companies have fallen by more than 15% in the last one month. This AI model is capable of replacing software coders and programmers. Particularly in the case of the Indian IT sector, Software as a Service (SaaS) is the main business and revenue source. Such AI models are expected to make the Software as a Service (SaaS) business almost dead! For Indian IT companies, this is news which they never imagined but are now facing. This is a kind of Kodak Moment for the Indian IT sector! Nokia also experienced this and could never recover despite its complete dominance!

The said AI model and such other models are expected to completely disrupt and shake the global IT sector, and the ramifications may be even broader than assumed! However, there is also a possibility that the buzz around AI may prove to be hype, like initial opposition to calculators and computers!

As of now, for a person, AI and its impact on businesses and humanity may be a mystery. Numerous questions are floating around with no final answers. However, for the Indian IT sector, the AI models present a deflection point. People across India are wondering to find the answers to these questions: Why are the stocks of Indian IT companies bleeding on the stock exchanges? Is it just because of disruptive innovation? Or something else?