India's Stakes in the Israel-Hamas Conflict

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The ongoing conflict between Israel and the Palestinian militant group Hamas has cast a cloud of uncertainty over the geopolitical stability of the Middle East. This situation is causing concern not only on a global scale but also in India due to its reliance on crude oil imports and strong trade connections with Israel.

The ongoing hostilities have already rattled domestic stock market investors, with experts warning that any further escalation could have adverse effects on the broader Indian economy. This tension has also led to a surge in gold prices, reaching their highest level in over a week, driven by the Israel-Hamas conflict and dovish comments from key US Federal Reserve officials.

Spot gold, a significant indicator in the precious metals market, recently reached $1,865.19 per ounce, its highest point since September 29. As of 10:36 am, it remained stable at $1,860.21. Meanwhile, US gold futures saw a 0.5 percent increase, reaching $1,874.10.

In the domestic market, trends were mixed on Tuesday. Gold prices on the Multi Commodity Exchange (MCX) were trading higher, while silver prices experienced a decline. Gold futures maturing on December 5, 2023, reached Rs 57,744 per 10 grams, showing a slight increase of Rs 98 or 0.17 percent from the previous close of Rs 57,572. It's important to note that gold prices can vary across different regions in India due to factors such as excise duty, making charges, and state taxes.

The conflict also has exacerbated market volatility, contributing to existing uncertainties as investors brace themselves for corporate earnings reports and the release of crucial US inflation data later this week.

The rise in oil prices, one of the immediate impacts of this conflict, poses a significant challenge to India, the world's third-largest importer of crude oil. When oil prices soar, it often leads to increased costs across various sectors, potentially triggering inflation and slowing down economic growth.

Palka Arora Chopra, Director of Master Capital Services Ltd, pointed out, "Increasing geopolitical risk in the Middle East could raise oil prices, leading to a sustained reduction in oil supply, which, in turn, could affect domestic inflation and potentially lead to elevated interest rates."

Jayden Ong, Senior Market Analyst, APAC at Vantage, echoed these concerns, stating that the ongoing conflict's protraction could exert sustained upward pressure on crude oil prices and contribute to persistently elevated inflation rates, prompting central banks in various nations to maintain higher benchmark interest rates.

In summary, higher crude oil prices could have adverse consequences for India, where many sectors are already grappling with rising energy costs. Any further increase in crude oil prices could exacerbate inflation, which, though on a downward trend, still remains significantly above the Reserve Bank of India's upper limit of 6 percent.

As crude oil prices surge, the global economy faces the renewed threat of high inflation, affecting major oil-importing economies such as the United States, India, and China. Rising oil prices lead to increased production costs for various industries and higher energy expenses for businesses and households, which in turn drive inflation upward.


India's close economic ties with Israel add complexity to the situation. Israel is a significant trade partner for India, ranking as the third-largest in Asia and tenth globally. The bilateral trade between the two nations spans various sectors, including pharmaceuticals, agriculture, water, IT, and telecom.

Major exports from India to Israel include precious stones and metals, chemical products, and textiles, while Israel exports pearls, precious stones, chemical and mineral/fertilizer products, machinery and electrical equipment, petroleum oils, defence equipment, machinery, and transport equipment to India. Any escalation in the conflict between Israel and Hamas could disrupt this trade relationship, impacting a wide range of industries.

In the fiscal year 2022-23, Indian merchandise exports to Israel amounted to $7.89 billion, with Israeli exports to India reaching $2.13 billion, resulting in a total trade value of over $10 billion. India also has substantial investments in Israel, with cumulative overseas direct investment from India from April 2000 to May 2023 totalling $383 million.

Indian companies such as TCS, State Bank of India, Jain Irrigation, Sun Pharma, Infosys, Tech Mahindra, Adani, and Wipro are among the major players operating in or making acquisitions and investments in Israel. In essence, the Israel-Hamas conflict is not merely a regional issue; its further escalation could have far-reaching consequences for countries around the world, including India.