What Happened
- The escalation of the West Asia conflict — following joint military action by the United States and Israel against Iran — has severely disrupted India's gems and jewellery trade, with diamond shipments to and from Israel and Dubai halted due to flight cancellations and port closures.
- Surat and Mumbai together export 400-500 diamond parcels daily and import approximately 250-300 parcels via Dubai; both flows have been disrupted.
- The UAE (primarily Dubai) is India's largest export destination and raw material supplier for gems and jewellery: exports to Dubai in FY 2024-25 stood at USD 7,868 million; imports at USD 11,000 million.
- Exports to Israel in FY 2024-25 were valued at approximately USD 514-548 million; these have been halted.
- The Gem & Jewellery Export Promotion Council (GJEPC) described the situation as a "dual shock" — disrupting both upstream supply (rough diamonds, bullion) and downstream demand (export markets).
- Flight cancellations and airport shutdowns in Israel, Qatar, Kuwait, and UAE have disrupted the logistics chain critical to India's cut-and-polished diamond exports.
Static Topic Bridges
India's Gems and Jewellery Sector: Structure and Export Significance
India is the world's largest cutting and polishing centre for diamonds, processing approximately 90% of the world's rough diamonds by volume (though a smaller share by value). The gems and jewellery sector is one of India's largest export earners, contributing approximately 10-12% of total merchandise exports. Surat in Gujarat is the epicentre of diamond cutting and polishing, while Mumbai's SEEPZ (Santacruz Electronics Export Processing Zone) and Bharat Diamond Bourse handle high-value exports.
- Total gem and jewellery exports (Apr 2024-Jan 2026): USD 23.19 billion (GJEPC data).
- Key export markets: UAE (Dubai), USA, Hong Kong, Israel, Belgium, Japan.
- India imports rough diamonds primarily from Russia, Botswana, South Africa, Australia, and Belgium.
- Dubai is a critical trans-shipment and wholesale hub — not just an end market — for Indian diamonds.
- The sector employs approximately 4.64 million people directly and indirectly, predominantly in Gujarat and Maharashtra.
- The Gem & Jewellery Export Promotion Council (GJEPC), set up under the Ministry of Commerce, is the apex body promoting the sector.
Connection to this news: The trade disruption directly hits India's largest gems and jewellery export corridor (UAE) and one of its key niche markets (Israel), threatening both revenue and employment in one of India's most labour-intensive export sectors.
Strait of Hormuz and Red Sea as Global Trade Chokepoints
The Strait of Hormuz (between Iran and Oman) and the Red Sea (accessed via the Bab-el-Mandeb strait) are two of the world's most critical maritime chokepoints. Approximately 20% of global oil trade and 12-15% of global merchandise trade passes through these corridors. Disruptions — through blockades, military conflict, or Houthi attacks — force vessels onto longer routes around Africa's Cape of Good Hope, dramatically increasing freight costs and transit times.
- Strait of Hormuz width at its narrowest: ~34 km; approximately 17-21 million barrels of oil transit daily.
- Red Sea (via Suez Canal): About 12-15% of global trade; India-Europe shipping routes depend critically on this corridor.
- Since the Houthi attacks on Red Sea shipping began in late 2023, Indian exports via the Red Sea have faced significantly higher freight costs and insurance premiums.
- The Iran conflict adds a new dimension: potential closure of the Strait of Hormuz would be more severe than the Red Sea disruption, affecting Indian oil imports and chemical/petrochemical trade directly.
- Air freight, used heavily for high-value diamonds, is also affected when Middle East airports are shut or overflown.
Connection to this news: The gems and jewellery trade disruption is primarily logistical — flights and shipping routes through West Asia are disrupted — making this a direct consequence of the Iran conflict's geographic footprint on India's trade infrastructure.
India-UAE Comprehensive Economic Partnership Agreement (CEPA)
The India-UAE CEPA, signed in February 2022 and effective from May 2022, was India's fastest-negotiated trade deal. It significantly reduced tariffs on Indian gems and jewellery exports to the UAE — which is both a direct market and a global re-export hub. Under the CEPA, India's jewellery exports to the UAE have grown substantially. The agreement covers goods, services, and investment and is seen as a template for India's broader FTA strategy.
- India-UAE CEPA effective from: May 1, 2022.
- Gems and jewellery: UAE removed import duties on Indian cut and polished diamonds and gold jewellery under the CEPA.
- India's total exports to UAE in FY 2024-25: Approximately USD 35-36 billion; UAE is India's second-largest export destination.
- Dubai's DMCC (Dubai Multi Commodities Centre) is the world's largest diamond exchange — a critical node for Indian diamond trade.
- The CEPA had boosted gems and jewellery trade significantly; the Iran conflict-driven disruption represents a reversal of these gains.
Connection to this news: The disruption to the UAE corridor directly undermines the trade gains of the India-UAE CEPA, highlighting how geopolitical shocks can override diplomatic and trade framework benefits.
Key Facts & Data
- India processes approximately 90% of the world's rough diamonds by volume.
- Daily shipments: 400-500 export parcels; 250-300 import parcels via Dubai.
- Exports to UAE (FY 2024-25): USD 7,868 million in gems and jewellery.
- Imports from UAE (FY 2024-25): USD 11,000 million (rough diamonds, bullion).
- Exports to Israel (FY 2024-25): ~USD 514-548 million (halted due to conflict).
- Total sector employment: ~4.64 million people.
- GJEPC described the situation as a "dual shock" to supply and demand.
- Strait of Hormuz: ~20% of global oil trade; ~34 km wide at narrowest.
- India-UAE CEPA: Signed February 2022, effective May 2022 — eliminated tariffs on Indian gems and jewellery in UAE.