New US sanctions and the UAE’s suspension of trade and financial transactions with Iran are threatening Indian exports of rice, tea and pharmaceuticals routed through Dubai.
Trade Faces Fresh Pressure
India-Iran trade is facing another major disruption after the United Arab Emirates suspended trade and financial transactions with Iran, while Washington prepares additional sanctions targeting Tehran and entities doing business with it.
The developments threaten a key commercial route used by Indian exporters, particularly those shipping rice, tea and pharmaceuticals to Iran through Dubai.
Dubai Route Takes Hit
Dubai has traditionally served as an important transit and financial hub for India's trade with Iran. The UAE's decision to halt economic and financial dealings with Tehran has therefore created immediate concerns for Indian exporters.
Indian exporters have warned that prolonged disruption could increase freight, insurance and payment costs and make shipments to Iranian buyers more difficult.
Rice Exporters Face Risk
India's basmati rice industry is among the sectors most exposed to the disruption. Exporters in northern India have relied heavily on the Dubai route to reach Iranian customers.
India exported about $383 million worth of rice to Iran during the first half of 2026, making the disruption particularly significant for rice millers and exporters dependent on the Iranian market.
Tea And Pharma Affected
Tea and pharmaceutical exporters are also expected to face difficulties if Dubai-based trade channels remain closed.
Indian tea exports to Iran were worth about $14.34 million in the first half of 2026. Exporters say a substantial part of this business has traditionally moved through the UAE, leaving the sector vulnerable to the latest restrictions.
Food and pharmaceutical products could potentially seek exemptions from sanctions, but exporters may still face higher shipping, insurance and banking costs even if such exemptions are granted.
Bilateral Trade Collapses
India and Iran once maintained a significantly larger trading relationship. Bilateral trade has now fallen by more than 90% from its 2018-19 peak of around $17 billion, with India's exports increasingly concentrated in goods that can qualify for humanitarian exemptions.
The latest restrictions could further reduce commercial flows between the two countries unless alternative payment and shipping arrangements are developed.
Oil Imports Also Uncertain
India's trade exposure is not limited to exports. Iranian crude oil imports have also increased in 2026 after a US exemption allowed Indian refiners to resume purchases.
Iranian crude imports by India were valued at approximately $707 million in the first half of 2026. However, continued purchases could become more difficult if Washington expands secondary sanctions and removes or tightens existing exemptions.
Alternatives Under Consideration
Indian exporters are exploring alternative routes and direct shipments to reduce dependence on Dubai. Turkey is among the routes being considered, although alternatives could involve higher transportation, insurance and payment costs.
The immediate impact is likely to be felt most strongly by smaller exporters and industries that depend on predictable logistics and established financial channels.
For India, the challenge will be to preserve legitimate trade in essential goods while navigating expanding US sanctions, tighter regional shipping conditions and the UAE's restrictions on Iranian commerce.
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