India’s basmati rice sector is experiencing significant disruption in the wake of US-Israeli war on Iran, with exports hampered by mounting logistical challenges.
The Middle East remains the backbone of India’s basmati trade, absorbing most of the 6.06 million mt exported in 2024–25, according to the Agricultural and Processed Food Products Export Development Authority (APEDA).
“The Middle East remains a key market for India’s basmati rice exports, driven by strong demand for premium varieties such as 1121 and 1509 basmati. Because of this strong demand, the region plays an important role in supporting India’s basmati trade, and any disruption to shipping routes, logistics, or payment channels can quickly affect export flows, freight costs, and overall market sentiment,” said Tanya Rana, Senior Price Reporter at S&P Global Commodity Insights.
For 2024-25, APEDA figures reported that Saudi Arabia was the largest buyer at 1,173,957 mt, followed by Iraq at 905,601 mt and Iran at 855,136 mt.
“The figures highlight the Middle East’s continued importance in India’s basmati export market,” said Rana.
Turmoil in the market
Since the conflict escalated, freight and shipping on India–Middle East routes have been severely complicated.
Freight cost spikes have been extreme, with Platts assessing PCR 33 — West Coast India to the Middle East — at U$3,600/FEU on March 12, a 1,209% jump from February 27. TCR 33 on the same route surged to U$2,300/TEU, up 1,050% over the same period.
Carriers have also introduced emergency fuel surcharges and war‑risk premiums to offset escalating operating costs, while some services to Persian Gulf ports have been suspended or diverted.
“Major container lines have introduced additional surcharges across global trade lanes, including emergency fuel surcharges and peak-season charges, which market participants say are being added on top of existing war-risk premiums, further increasing overall freight costs,” said Rana.
Container availability has tightened sharply as disruptions slow equipment circulation and leave cargo stranded at hubs such as Jebel Ali, she added.
“Exporters said that even when buyers are willing to pay higher freight rates, securing containers has become difficult, forcing some traders to delay shipments or reroute cargo through alternative ports.”
India’s basmati shipments to the Middle Eastern markets have slowed as a result of all the challenges.
“Some exporters said they have had to reroute shipments, renegotiate contracts or shift sales to FOB terms to pass freight costs to buyers, while others have temporarily paused shipments due to elevated logistics costs. Traders also reported cargo buildup at regional hubs such as Jebel Ali, while delays to destinations including Iran, Iraq and Afghanistan have created uncertainty among buyers and weighed on trade activity,” said Rana.
A ripple effect on the domestic market
The export disruptions have begun to weigh on the domestic market by increasing available supply and weakening exporter demand.
Reflecting the softer sentiment, Platts assessed India 1121 Steam Basmati Rice 2% Broken at U$994/mt FOB FCL on March 6, down U$41/mt week on week.
The turmoil in freight markets has also shifted buying and selling behaviour, with both sides adopting a more cautious stance amid uncertainty over container availability and delivery timelines.
Traders and exporters said many buyers in the Middle East are delaying purchases or seeking to renegotiate contracts due to elevated freight costs and logistical risks.
Rana said that some exporters are moving to Free on Board (FOB) terms, which transfers freight responsibility to buyers, while others are exploring alternative routes or temporarily pausing exports until conditions improve.
“Market participants said the uncertainty has reduced near-term trading activity and limited fresh deals, with many buyers waiting for more clarity on freight conditions before committing to new shipments,” she added.
According to Rana, Indian authorities have introduced temporary measures to ease export disruptions caused by the effective closure of the Strait of Hormuz.
“The government allowed vessels carrying export cargo that could not reach their destination ports to return and berth at the same Indian ports from which they departed, enabling cargo to be offloaded and processed more quickly.”
Basmati prices: Rise before the fall
Prior to the escalation of the conflict, basmati prices had been rising through February on the back of strong demand from key Middle Eastern buyers.
Platts assessed India 1509 Steam Basmati Rice 2% Broken at U$936/mt FOB FCL on February 27, up U$95/mt from the previous month as purchasing interest strengthened in markets such as Iran, Iraq and the UAE.
India 1121 Steam Basmati Rice 2% Broken also climbed to U$1,035/mt on the same date, an increase of U$62/mt that reflected firm appetite for premium grades.
“However, the upward momentum reversed after the conflict escalated, as shipping disruptions, higher freight costs and logistical uncertainty slowed export activity to the Middle East. With exporters facing difficulties securing freight and buyers becoming cautious, market sentiment weakened and prices declined,” said Rana.
As demand cooled, prices slipped, with Platts assessing 1509 Steam at U$920/mt FOB FCL on March 6 and 1121 Steam at U$994/mt over the same period.
