War impact on India-GCC trade ties

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WHAT WE’RE TRACKING TODAY

THIS AFTERNOON: Gulf FTA’s back on agenda; Iran rests Iran oil appetite

Good morning, friends. It’s another week, another ceasefire. The US and Iran have reportedly agreed (once again) to cease strikes, following a spate of attacks over the weekend, with the two sides planning to resume talks in Doha tomorrow to resolve their dispute over the Strait of Hormuz. Hostilities reportedly reignited over contradicting interpretations of the MoU signed by both sides earlier this month to secure an interim peace.

Our big story today looks at how the war reshuffled India’s trade ties with the GCC. Commerce Ministry data shows trade with the UAE and Saudi Arabia rebounding in May following a sharp contraction in March, while Oman has emerged as an outlier, recording a surge in volumes as it bypassed the Hormuz blockade.

Speaking of trade: New Delhi is shifting its strategy, prioritizing bilateral freetrade agreements with Qatar and Bahrain over a broader GCC-wide pact to fast-track results.

On the energy front: A 60-day US sanctions waiver has Tehran testing the waters with Indian refiners, offering crude at marked-down prices as it looks to reclaim its market share.

Gulf FTA’s back on agenda

India is prioritizing freetrade agreement (FTA) talks with Qatar and Bahrain over a bloc-wide trade agreement with the Gulf Cooperation Council (GCC). While New Delhi will keep the door open for negotiations with the six-member GCC bloc, it expects the one-on-one track to yield faster results, Business Standard reports, citing officials aware of the matter.

Why bilateral first: A GCC-wide agreement could take longer because member states need to develop a consensus internally to close the agreement.

To expedite the process, India plans to use its existing comprehensive trade agreements with the UAE and Oman as blueprints for the Qatar and Bahrain talks. Those prior pacts successfully secured duty concessions on nearly 99% of Indian exports, granting zero-duty access for labor-intensive industries including gems, jewelry, textiles, leather, footwear, engineering goods, and pharmaceuticals.

Bahrain talks are moving faster, as Doha is pushing to negotiate a bilateral investment treaty simultaneously with the FTA, aiming to conclude both agreements as a package. This complicates logistics on the Indian side, as the Commerce Ministry is responsible for FTA talks, while the Finance Ministry takes point on investment treaty negotiations.

Iran offers oil

60-day US sanctions-waiver on Iran’s energy export is bringing marked down offers on crude oil for Indian refiners. Traders are offering Iranian crude at a markdown of USD 3-4 / bbl on a landed basis to Indian buyers, Reuters reports, citing Indian refining sources. The proposals are being floated primarily by the National Iranian Oil Co (NIOC), alongside traders operating out of Singapore and Dubai.

The details: Tehran is moving quickly to leverage the waiver window and sell more of its barrels to India to its market share. Earlier, India received two Iranian crude cargoes in April under a 30-day US waiver, with payments settled in Chinese yuan.

The bottlenecks: Indian refiners have limited near-term room for Iranian crude because most have already tied up supplies through August. Moreover, other Middle Eastern term suppliers are also pressing buyers to honor annual contractual commitments. Indian refiners are also wary of picking Iranian barrels as payment mechanisms and banking channels remain a major roadblock.

Why it matters: Iran was India’s second-largest crude supplier in FY 2010-11, before US sanctions pushed New Delhi to reduce purchases and halt imports from Tehran in May 2019. The latest approaches are not a confirmed restart in buying, but they show Iran is trying to use the waiver period to regain its position as a major supplier to India.

LPG curbs lifted

India is restoring liquefied petroleum gas (LPG) supply for commercial users back to pre-war levels after withdrawing war-time controls. The Ministry of Petroleum and Natural Gas has also removed all restrictions on commercial LPG sales, according to a press release.

Why LPG first? LPG was one of India’s most exposed fuels during the Hormuz disruption. India imports around 60% of its LPG consumption, with nearly 90% of those imports moving through the Strait of Hormuz.

The backstop stays: The rollback does not fully remove the government’s fuel-security guardrails. LPG supplies to household usage will remain protected, while directing refiners to maintain domestic LPG production at no less than 40k metric tons per day.

In Context- India had cut gas supplies to commercial and industrial consumers during the crisis. In April, gas demand declined 16.7% y-o-y and LPG sales fell 12.7% y-o-y due to supply restrictions, while allocation for the commercial sector remained at 70% of utilization capacity as bottled gas was diverted to households.

Trump heading to India?

US President Donald Trump could visit India early 2027 as Washington and New Delhi hope to conclude the long-awaited bilateral trade agreement in the coming weeks, US Secretary of State Marco Rubio told IANS. The two-sides are working “on the last inches of the trade deal,” Rubio said, calling India one of the US’ closest strategic partners.

Data point

INR 254.9 bn (USD 2.7 bn) — that is the amount the Indian government has raised through offer-for-sale transactions in eight listed public-sector companies so far in 2026, Fortune India reports, citing Prime Database. The Finance Ministry is targeting to raise INR 800 bn (USD 8.7 bn) through disinvestment and asset monetization in the current fiscal year.

Why it matters: The biggest public-sector stake-sale drive in 11 years comes as New Delhi seeks to shore up non-tax revenues after cutting fuel taxes and grappling with weaker petroleum tax collections amid elevated crude prices. The fundraising push also follows trade disruptions on the back of the US-Iran war, as shipping and energy price volatility hit India-GCC commerce hard — reinforcing the need to enhance fiscal buffers.

PSAs

Air India Express is set to add Guwahati to its UAE network with new weekly flights to Dubai and Abu Dhabi starting August, as per the airline’s press release. It will operate Dubai flights every Tuesday, from 4 August, and Abu Dhabi flights every Friday, from 7 August, giving Northeast India its first direct air links to the UAE.

The big story abroad

Sovereign funds may be getting bolder: One-third of sovereign funds surveyed by US investment management firm Invesco say they plan to double down on riskier, unlisted assets like private credit, private equity, and infrastructure this year — around one-fifth want to reduce exposure to stocks. The trend dovetails into the AI-led paradigm shift in investment, as lenders pivot from concentrated stock markets to wagering on data centers and associated energy sources.

But… is private credit on a stable path? Major private credit players like Blue Owl, KKR, and Elliot Investment Management are pumping USD bns into buy now, pay later (BNPL) models, providing a major windfall to platforms like PayPal. While the credit sector continues to swell on the back of BNPL, auto, and student loans, it has been seen by some as incentivizing a dangerous uptick in consumer debt — not unlike the levels seen before the 2008 mortgage crisis.

Is defense heading towards mass production? Because standard US munitions are both costly and slow to manufacture, some defense contractors are developing modular workshops to rapidly produce affordable missiles during wartime. Defense group Co-Aspire has designed missiles that can be built with off-the-shelf parts in a bid to capitalize on major order requests from big US spenders, the Pentagon and US Air Force.

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How the war rewired India’s trade with Gulf nations

The US-Iran war has dramatically reshuffled India’s USD 178-bn trade corridor with the GCC — exposing the risks of its dependence on the Strait of Hormuz, while rapidly elevating Oman’s status as an alternative route to the GCC.

The blockade of the Strait of Hormuz exposed India’s concentration risks and dependence on the UAE as a trade and logistics hub, Abhijit Mukhopadhyay, senior economist at Chintan Research Foundation, tells EnterpriseAM.

The great Gulf rerouting

The big picture: Nearly one-fifth of India’s imports and 14% of exports were at risk to the Hormuz blockade at the start of the war. However, India’s trade shock from the war recovered faster than feared. Exports to the GCC rebounded to USD 5.3 bn in May after collapsing 57% y-o-y to USD 2.1 bn in March, as per Commerce Ministry data.

A less risky inroad: The rebound in Gulf trade came primarily after exporters sped up energy cargo routing through Sohar, Salalah, and Duqm ports to bypass the Hormuz blockade. This allowed shipments to reach the UAE and the wider Gulf despite heavy maritime security risks, Commerce Secretary Rajesh Agrawal said.

UAE still on top, no longer untouchable

Trade with the UAE and Saudi Arabia slumped sharply in March — at the peak of hostilities — before rebounding in April, with flows remaining below February levels in most cases.

Exports to the UAE fell 60.3% m-o-m from USD 3.2 bn in February to USD 1.2 bn in March, before recovering 68.6% m-o-m to USD 2.1 bn in April. Similarly, imports dropped 45.1% m-o-m to USD 2.5 bn in March before coming back up by 57.6% in April.

The recovery suggests that March’s slump was temporary, with energy and merchandise trade flows normalizing after the disruption, although trade with the Emirati market had yet to regain February levels.

An indispensable anchor: Indian exports to the UAE rose to USD 3 bn in May. “Any disruption around the UAE-linked routes quickly becomes a [India-UAE] CEPA stress test, exposing a gap between tariff liberalization and logistics resilience,” says Mukhopadhyay.

Riyadh gains

Trade with Saudi Arabia recovered even more strongly after the ceasefire. Exports declined 44.2% in March to USD 527.8 mn, before rising 61.4% in April to USD 851.9 mn, while imports fell 26% to USD 2 bn before surging 86.4% to USD 3.8 bn. Despite the rebound, April trade with both Saudi and the UAE remained below February levels in most categories, indicating only a partial recovery.

Saudi Arabia came up as the standout performer, with exports rising 11.1% y-o-y to USD 915.5 mn. “Saudi Arabia gained import share while the UAE lost share, showing rerouting inside the Gulf rather than a smooth continuation of the old pattern,” Mukhopadhyay notes.

The arrival of the Oman corridor

Imports from Oman surged 305% y-o-y in May, reaching USD 1.9 bn, making it India’s 10th-largest import source globally, even as exports to Oman fell 10.4% y-o-y in May.

Why it matters: The Oman corridor initially prioritized perishable goods before expanding to broader merchandise exports. The route has now established Oman as a critical logistics gateway for Indian trade into the Gulf. “India can capitalize by using Oman as a diversification point for logistics, transshipment, and regional redundancy, rather than treating it as a full substitute for the UAE,” Mukhopadhyay opines. India is expected to continue diversifying its energy sourcing, with procurement moving toward greater supply flexibility and risk management.

The rest of the Gulf counts losses

Qatar and Kuwait experienced the sharpest hits in trade flows. Qatari imports fell 82.9% y-o-y, from USD 911 mn last year to USD 156 mn in May — the most notable dip — given India’s historic dependence on Qatari LNG.

Imports from Kuwait collapsed by 96.4% in May — despite its major role in India’s crude supply mix. The magnitude of the drop suggests a near-complete disruption of oil flows.

The post-Hormuz lesson

“The most exposed sectors are export lines tied to Gulf consumption and fast re-export chains, especially in food and consumer goods,” explains Mukhopadhyay. A prolonged slowdown could slow India's export growth, widen the trade deficit, and put additional pressure on the current account deficit — if energy import costs remain high. “The near-term risk is not collapse, but a persistent drag on external-sector momentum.”

India needs to plan a multi-port Gulf strategy, Mukhopadhyay argues. “If disruptions persist for another quarter, the greatest damage may come not from lower trade volumes alone but from delayed deliveries, canceled orders, and buyers shifting to more reliable suppliers.”

The conflict has also cast uncertainty over the India-Middle East-Europe Economic Corridor. While not dead, Mukhopadhyay believes the project has weakened as a near-term proposition and will need to be rebuilt.

What’s next: Looking ahead, Gulf sovereign funds are unlikely to retreat from India despite trade disruptions, Mukhopadhyay notes. Instead, investors may increasingly favor Indian manufacturing and other real-economy sectors as a hedge against regional volatility. The near-term costs remain substantial, he says.

Dubai’s Gems Education lines up India expansion with USD 30 mn investment

Gems Education is making a fresh push into India. The Dubai-headquartered education operator plans to invest up to USD 30 mn in the country over the next three to five years, Economic Times reports. The expansion plans include opening more than 30 Gems-operated schools across India, alongside a network of over 1k partner schools that will carry the Gems brand, targeting a total of over 3 mn students. It’s also planning to launch a teacher-training system and a Category II alternative investment fund, targeting school infrastructure and new campus developments in high-demand, low-supply markets.

The rollout is already taking shape. Gems India has lined up 21 school projects, with the first five campuses due to open this academic year, while another 16 campuses are planned over the following two years across eight states.

The move adds to its expansion plans in the UAE, including plans to invest AED 2 bn over the next three years, despite what CEO Dino Varkey described as a slight dip in student registrations this year as fewer families move here from overseas amid geopolitical uncertainty, he told Reuters.

Just a small blip? “It’s still very much a growth scenario. Just maybe the velocity has been dialed down a little bit,” Varkey said. “Once we have a really clear resolution in relation to the conflict, I actually expect a lot of families to look back on their decisions and frankly choose to move over here,” he added.

India is set to clear Aramco and China-backed Horse Powertrain investment proposal

Aramco-backed Horse Powertrain clears regulatory hurdle? India is preparing to clear INR 35 bn (USD 370 mn) in investment by Horse Powertrain, bringing Saudi-linked hybrid powertrain manufacturing into Renault’s domestic operations, Bloomberg reports, citing people familiar with the matter.

Who are they? London-headquartered Horse Powertrain is owned by Saudi Aramco, Renault, and the Chinese automaker Zhejiang Geely Holding Group. Renault and Geely each own 45% of the company, while Saudi Aramco holds 10%.

The approval would allow Horse Powertrain to invest in Renault’s manufacturing operations in India to produce hybrid powertrains and engines locally. The investment is expected to happen in phases, starting with Renault’s Chennai plant in southern India. The company has applied to Indian authorities for permission to invest in the country and expects a formal decision soon.

China-linked investment test: The approval would be among the first since India relaxed rules in March to allow investments from bordering countries to support local manufacturing. Large China-linked investments have been limited since India tightened foreign investment rules after border tensions with China in 2020.

Why it matters: The proposed investment would put a Saudi-linked manufacturing firm inside India’s local manufacturing chain at a time when New Delhi is selectively reopening the door to Chinese-linked capital. It also points to a larger role for hybrid powertrain manufacturing in India, where electric vehicle adoption remains gradual.

Adani Group targets 10 GW nuclear portfolio by 2035

Adani Group plans to build up to 10 GW of nuclear power capacity by 2035, marking its entry into India’s newly opened private nuclear energy sector and positioning itself as the country’s largest private-owned nuclear player. Gulf SWF’s including Abu Dhabi’s International Holding Company have previously poured bns in Adani’s renewable firms.

“Our entry into nuclear energy through Adani Atomic Energy is another confident step towards securing India’s long-term energy future,” Chairman Gautam Adani said at the group’s annual general meeting. The conglomerate has already identified land for its proposed projects, but did not disclose locations.

Why it matters: India opened up nuclear power generation to private and foreign investment last year as a part of its plan to expand installed nuclear capacity to 100 GW by 2047, from around 8 GW currently. With the dissolution of the state’s monopoly on nuclear generation, Adani’s nuclear pivot is less about green optics and more about securing non-intermittent power for its digital infrastructure. The group also raised its data center target to 3 GW by 2030 — anchored by a landmark GW-scale project with Google — which will require massive, round-the-clock baseload power.

The Gulf angle: India and the UAE are planning to jointly develop large nuclear reactors and small modular reactors. This positions the conglomerate as an investment vehicle for cross-border joint ventures in small modular reactors to power the corridor’s high-growth AI and data center hubs.

ICYMI: State-run Nuclear Power Corporation of India aims to build 50 GW of capacity, while National Thermal Power Corporation has outlined plans for 30 GW.

India’s Rites forms JV with UAE-based NICC Infrastructure Construction

India’s Rites forms UAE JV

India’s Rites is deepening its UAE push: Indian state-owned transport and infrastructure company Rites secured board approval to set up a joint venture with UAE-based NICC Infrastructure Construction, according to a regulatory filing (pdf). The company has yet to disclose details on ownership structure, capital backing, or the specific activities the venture will undertake.

Remember: Rites has been eyeing cooperation with UAE entities for a while now, having signed an MoU with Etihad Rail back in 2024 to explore cooperation on rail infrastructure project development. Earlier the same year, the company signed an agreement with AD Ports on possible collaborations across ports, logistics parks, economic and freezones, rail infrastructure, and projects linked to the planned India-Middle East-Europe Economic Corridor. It also inked a similar agreement with DP World in 2025.

Likhitha Infrastructure wins Abu Dhabi pipeline contract

India-based pipeline contractor Likhitha Infrastructure has added a UAE order to its international project book, securing around INR 5.1 bn (USD 54 mn) contract from China Petroleum Engineering and Construction Corporation-Abu Dhabi. The order is for the construction of a pipeline at Adnoc’s Asab oil field in Abu Dhabi and will be executed in 21 months, according to a company exchange filing.

Bond investors are questioning the AI boom as spending heads toward USD 5.5 tn

Tech companies are raising equity like it’s the dot-com era again — and bond investors are getting nervous. Alphabet sold USD 85 bn of stock this month, while SpaceX followed its record USD 75 bn IPO with a USD 25 bn bond sale, Bloomberg reports.

Why the nerves? Companies that already generate strong cashflow are still raising fresh capital, suggesting they are preparing for heavier AI spending than investors had expected. OpenAI could pursue an IPO as soon as next year, while Anthropic and Meta are weighing equity raises. “It’s telling us that the amount of capital expenditure that they’re going to do is probably going to go up,” Columbia Threadneedle’s Tom Murphy said.

The bill keeps getting bigger: JPMorgan now expects AI and data center-related spending to reach USD 5.5 tn by 2030, up USD 400 bn from its November forecast. It also expects USD 2.1 tn of data center financing to be raised in high-grade bond markets over the next five years, up from USD 1.5 tn previously.

Bond markets are already blinking: SpaceX’s USD 25 bn bond sale weakened shortly after trading began, leaving investors with roughly USD 360 mn of paper losses relative to Treasuries, while spreads on US investment-grade tech bonds widened to 79 bps this month from 74 bps at the end of May.

The risk is duration as much as debt. Bondholders are being asked to take decades of AI obsolescence risk, with SpaceX and Nvidia both selling 20- and 30-year bonds this month and Alphabet selling 100-year GBP bonds in February. That makes the downside more awkward for credit investors: shareholders get the upside if the AI wager works, but bondholders are left holding the bag if it does not.

That is exactly the kind of risk the Bank for International Settlements (BIS) is worried about. The BIS warned in its annual report (pdf) that the AI boom is becoming increasingly reliant on debt and complex funding structures, while supply bottlenecks and intense competition could trigger the kind of overinvestment seen in previous boom-and-bust cycles.

The warning goes beyond AI: The BIS also flagged record public debt, sticky inflation risks, and fragile bond markets, warning of a new “sovereign-financial stability nexus” that could amplify shocks, Reuters reports. “Policymakers must act now,” BIS General Manager Pablo Hernández de Cos said. “Delay will only make the necessary adjustments more costly.”

MARKETS THIS MORNING-

Asia-Pacific markets were mixed in early trading this morning, as regional developments continue to weigh on investor sentiment. Japan’s Nikkei and South Korea’s Kospi were both down, while the Hang Seng was looking at gains. Over on Wall Street, stocks are set to open higher, with futures in the green.

Sensex	76,653	-0.5% (YTD:-10%)
NIFTY 50	23,949	-0.4% (YTD: -8.3%)
ADX	9,846	-0.3% (YTD: -1.4%)
DFM	5,995	-0.3% (YTD: -0.8%)
Tadawul	10,827	-0.7% (YTD: +3.2%)
EGX30	49,915	-0.8% (YTD: +19.3%)
Boursa Kuwait	9,142	+3.4% (YTD:+10%)
QSE	10,242	-0.5% (YTD: -4.8%)
S&P 500	7,354	-0.05% (YTD: +7.4%)
FTSE 100	10,489	-0.1% (YTD: +5.6%)
Euro Stoxx 50	6,215	-0.1% (YTD: +7.3%)
Brent crude	USD 73	+1.6%
Natural gas (Nymex)	USD 3.2	-0.9%
Gold	USD 4,045	-1.2%
BTC	USD 60,063	-0.1%

The values in the table above are listed according to the market position as of 3:30pm IST / 2pm GST.

Iran seeks renewed energy ties with New Delhi

Iranian Petroleum Minister Mohsen Paknejad visit to India has opened doors for renewed energy cooperation. Paknejad met Indian ministers — including Indian Petroleum and Natural Gas Minister Hardeep Singh Puri and Power Minister Manohar Lal Khattar — to bolster energy sector ties between the two countries, as per a post on X.

Energy talks on agenda: “We have had historical relations between Iran and India for a long time [...] We are now ready for all the relations we can have in economic fields with India,” Paknejad said.

CALENDAR

JULY

1-3 July (Wednesday-Friday): Seafood Expo Bharat, Chennai Trade Centre, Chennai.

3-4 July (Friday-Saturday): Rail & Transit Expo (RailTrans), Bharat Mandapam, New Delhi

3-4 July (Friday-Saturday): SOMS International Exhibition & Conference, Gandhinagar, Gujarat.

8-10 July (Wednesday-Friday): India Energy Storage Week, New Delhi.

14-17 July (Tuesday-Friday): Bharat Tex, New Delhi.

22-24 July (Wednesday-Friday): Rail & Metro Technology Conclave, Bharat Mandapam, New Delhi.

Dates TBA: Monsoon Session of Parliament, New Delhi.

AUGUST

15 August (Saturday): Independence Day.

26 August (Wednesday): Prophet Mohammad’s Birthday.

SEPTEMBER

1-3 September (Tuesday-Thursday): India Energy Week, Dwarka, New Delhi.

1-6 September (Monday-Saturday): Dubai Fashion Week, Dubai Design District.

7 September (Sunday): Opec+ meet to discuss production policy for October.

7-9 September (Monday-Wednesday): iPHEX 2026 International Pharmaceutical Exhibition, Bharat Mandapam, New Delhi.

8-11 September (Tuesday-Friday): Global Fintech Fest, Mumbai.

9 September (Tuesday): Envision 2025, Atlantis, The Royal, Dubai.

17-19 September (Thursday-Saturday): Semicon India Conference, Yashobhoomi, Delhi.

OCTOBER

2 October (Friday): Gandhi Jayanti (Mahatma Gandhi’s Birthday).

5-7 October (Monday-Wednesday): Reserve Bank of India’s Monetary Policy Committee meeting for the October / September policy cycle.

7-10 October (Wednesday-Saturday): India Mobile Congress, Yashobhoomi, New Delhi.

20 October (Tuesday): Dussehra.

NOVEMBER

24 November (Tuesday): Guru Nanak Jayanti.

DECEMBER

8-11 December (Tuesday-Thursday): Expand North Star, Dubai.

25 December (Friday): Christmas Day.

JANUARY 2027

30 January-3 February (Saturday-Wednesday): Printpack India, India Expo Centre, Greater Noida (Delhi NCR).

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