The India-Pakistan Conflict: Ripple Effects on Global Trade Routes

The recent escalation of tensions between India and Pakistan, marked by missile strikes and retaliatory actions following the April 22, 2025, terrorist attack in Indian-administered Kashmir, has thrust South Asia into a precarious spotlight. Beyond the immediate humanitarian and geopolitical concerns, this conflict is disrupting global trade routes, supply chains, and economic stability. As professionals navigating an interconnected world, understanding these impacts is critical to adapting strategies and mitigating risks.

A Snapshot of the Conflict’s Trade Disruptions

The India-Pakistan rivalry, rooted in historical disputes over Kashmir, has led to significant trade-related measures since the Pahalgam attack, which killed 26 people, mostly tourists. Both nations have imposed stringent restrictions:

  • Trade Suspensions: Pakistan has halted all trade with India, including goods transiting through its territory to third countries like Afghanistan. India has reciprocated by banning imports from or via Pakistan and suspending participation in the Indus Waters Treaty, which governs water-sharing critical for agriculture and industry.

  • Border Closures: The Attari-Wagah border, a key land crossing for trade, is closed, severing direct trade routes. This disrupts approximately $500 million in direct exports from India to Pakistan and $640 million in goods transiting to Afghanistan annually.

  • Airspace Restrictions: Both countries have closed their airspaces to each other’s airlines, forcing international carriers like Emirates, Qatar Airways, and British Airways to reroute flights. This increases fuel costs and delays, impacting global logistics networks.

Impacts on Global Trade Routes

  1. South Asian Supply Chains Under Strain
    India and Pakistan are integral to regional trade. India’s exports, including pharmaceuticals, textiles, and spices, and Pakistan’s textile and agricultural goods, face bottlenecks. Pakistan’s pharmaceutical sector, reliant on Indian raw materials, is scrambling for alternatives, with contingency plans to counter shortages. The closure of land routes through Pakistan also hampers India’s access to Afghan markets, a critical node in Central Asian trade.

  2. Air and Maritime Route Disruptions
    The airspace closures have forced airlines to take longer routes over the Arabian Sea, increasing operational costs and delaying cargo shipments. Maritime routes, while less directly affected, face risks if tensions escalate to naval standoffs. A potential conflict at sea, as noted by experts, could disrupt shipping lanes near Karachi, a vital hub for Pakistan’s trade. This would ripple across global supply chains, particularly for energy and textile markets.

  3. Economic and Market Volatility
    India’s stock markets have shown resilience, with the Nifty 50 and Sensex stabilizing after initial dips, but investor caution persists amid geopolitical uncertainty. Pakistan’s economy, already strained, faces a projected $1.14 billion trade loss due to blocked routes. Small- and mid-cap firms in both nations are underperforming, signaling broader economic ripples.

  4. Global Trade Alliances in Flux
    The conflict is reshaping trade dynamics. India’s strengthening ties with the U.S., particularly in tech and defense, may accelerate, while Pakistan’s reliance on China could deepen. These shifts could alter global trade negotiations, with India’s recent free trade deal with Britain and ongoing U.S. talks gaining strategic weight.

Navigating the Challenges: What Businesses Can Do

For professionals and businesses, the India-Pakistan conflict underscores the need for agility and foresight:

  • Diversify Supply Chains: Companies reliant on South Asian markets should explore alternative sourcing from Southeast Asia or the Middle East to mitigate disruptions.

  • Monitor Logistics Costs: Rerouted flights and potential maritime risks demand real-time tracking of shipping expenses. Partnering with logistics providers offering flexible routing options is key.

  • Assess Market Exposure: Firms with investments in India or Pakistan should stress-test portfolios for volatility, particularly in energy, textiles, and pharmaceuticals.

  • Engage in Scenario Planning: Anticipate further escalation scenarios, including water disputes or naval tensions, to prepare for worst-case impacts on trade routes.

A Call for Dialogue and Stability

The international community, including the U.N., U.S., China, and UAE, has urged restraint to prevent a full-scale conflict between these nuclear-armed neighbors. For global trade to thrive, stability in South Asia is paramount. Businesses and policymakers must advocate for dialogue to de-escalate tensions and restore trade flows.

As we navigate this volatile landscape, staying informed and adaptable is crucial.

Myles Alexander