THIS AFTERNOON: New Delhi seeks safe passage of India-bound tankers

Good afternoon, friends. Hormuz risk is flaring back up this morning and India is weighing diplomatic outreach to Iran to free at least nine stranded tankers as attacks on shipping resume, while Jaishankar wraps a four-nation Gulf tour in Oman after stops in Qatar, Bahrain, and Kuwait.

Our lead story today is the subsea power cable India wants to lay to the UAE — and why the economics might run backwards. India is proposing an undersea cable to the Gulf costing an estimated USD 4.7 bn, aiming to become a power exporter. But an energy economist tells us the real opportunity isn’t bulk export at all.

Plus: Mumbai-listed SEPC is eyeing to acquire a controlling stake in Abu Dhabi’s Avenir International, buying its way into Adnoc-pre qualified status. Both the IMF and the ADB trimmed India’s near-term growth outlook this week, pinning the cut on post-war energy costs.

India reconsiders Iran talks to secure Hormuz passage

India is considering diplomatic engagement with Iran to secure safe passage for at least nine India-bound tankers stranded in the Arabian Gulf as renewed attacks threaten shipping through the Strait of Hormuz, Bloomberg reports, citing unnamed sources.

Shipping risks persist: The government is monitoring vessel movement, which are carrying crude oil and LPG, and will engage with Iranian authorities over the safety of Indian seafarers.

Why it matters: Multiple Indian seafarers were killed and injured in the US and Iran strikes on commercial vessels throughout the conflict. Since the war began in late February, only about 50 India-bound vessels have crossed the waterway, leaving Indian refiners dependent on alternative suppliers and more expensive cargoes.

Meanwhile, India’s External Affairs Ministry expressed deep concern over the renewed escalation and attacks on commercial vessels transiting the Strait of Hormuz, warning that the developments could hinder critical energy and trade flows, as per a statement.

Maritime risks are back: New Delhi called on all parties to exercise restraint, de-escalate tensions, protect civilians, and ensure the uninterrupted flow of energy supplies and commerce. “We urge the parties to return to dialogue and diplomacy to achieve a peaceful and lasting solution to the conflict,” the Ministry said.

RBI renews push for crypto curbs

The Reserve Bank of India is yet again “leaning towards prohibiting” cryptocurrencies, and advocating to completely bar domestic banks from taking any exposure to crypto assets particularly private stablecoins, Reuters reports, citing access to internal government documents.

The concerns: The RBI sees cryptocurrencies as a threat to financial stability, monetary sovereignty, and tax compliance, as per the newswire. At the same time, India’s Income Tax Department believes transactions routed through offshore exchanges and private wallets are difficult to trace, leading to tax evasion. Fewer than one-quarter of the 645k individuals who traded cryptocurrencies in FY 2023 disclosed those transactions in their tax filings.

Why it matters: India has an estimated 39 mn crypto investors, holding around USD 2.1 bn in digital assets. A ban on digital assets may drive Indian investors toward the regulated digital ecosystems, including Dubai's Virtual Assets Regulatory Authority, and Abu Dhabi Global Market.

Emirates adds A380 to Dubai-Delhi route

Dubai-based carrier Emirates will deploy its Airbus A380 on the Dubai-Delhi route from 25 October, making Delhi its third route for A380 in India after Mumbai and Bengaluru, according to a company statement. The aircraft will operate one of Emirates’ daily Dubai-Delhi services in a four-class layout, adding A380 service to one of the busiest India-UAE aviation corridors.

Delhi upgrade: The airline’s three other daily services on the Delhi-Dubai route will be operated by retrofitted Boeing 777 aircraft, also in a four-class layout, making Premium Economy available across all daily Emirates flights between Dubai and Delhi. Emirates plans to offer Premium Economy to five more Indian cities by October end.

Emirates serves nine routes to India with 167 weekly flights to Dubai and onward connections to almost 140 destinations.

The aircraft upgrade comes as UAE carriers have limited room to add India flights under bilateral seat caps, pushing them toward larger aircraft and premium cabins on existing routes to bolster revenues. With the help of protectionist policies pushed by New Delhi, the Indian carriers are expanding into the Gulf markets even as carriers like Emirates have lobbied for easing of seat limits.

Data point

USD 1.5 bn — That is the amount State Bank of India has raised so far through foreign-currency deposits under a special initiative for overseas Indians launched last month, Bloomberg reports.

What’s new: The inflows follow the Reserve Bank of India’s decision to provide full hedging-cost support to banks raising three- to five-year foreign-currency deposits after the war, in a bid to tap diaspora savings to bolster FX reserves. The scheme could prove especially attractive for wealthy overseas Indians, family offices, and investors in Gulf financial hubs such as Dubai and Riyadh.

The big story abroad

The US-Iran tit-for-tat continues, but at least technical talks are still on, according to a US official who spoke to Bloomberg on condition of anonymity. Talks had stalled this week while Iran held funeral rites for former Supreme Leader Ali Khamenei, and tensions had escalated as the US hit roughly 90 targets on Wednesday night, framing the strikes as degrading Iran’s capacity to threaten shipping in the Strait of Hormuz, while Iran retaliated against US bases in Kuwait, Bahrain, and Qatar.

Iran says the US also hit its rail network — overnight strikes damaged a bridge on the Gorgan-Incheh Borun line in Golestan province, a corridor linking Iran to Turkmenistan and Kazakhstan, disrupting passenger service to Mashhad just as Khamenei’s coffin arrived for burial there. Strikes were also reported on power transmission infrastructure in Chabahar and Konarak in the southeast.

The conflict is squeezing diesel markets: Russia’s new export ban — a response to Ukrainian drone strikes that have knocked out close to half its refining capacity — has combined with renewed Hormuz risk to push US diesel prices up 13%, and diesel futures in London up 14%.

Meanwhile, Fed chair Kevin Warsh named five external task forces stacked with names like Mervyn King and Marc Andreessen to reshape Fed communications, the balance sheet, data collection, AI-era productivity, and inflation targeting — a sign that he’s moving ahead with an overhaul of the Fed’s communications framework with recommendations due to the FOMC by year-end.

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