India, the world's largest recipient of remittances, faces significant economic risks as the conflict between the U.S. and Iran deepens in the Middle East [1]. Remittances account for nearly 3.5% of India's GDP, surpassing the share of exports to the U.S., which stands at 2% [1]. In the financial year 2025, India received $135.4 billion in remittances, with the Gulf countries contributing approximately $51.4 billion, or 38% of the total inflows [1]. This figure is comparable to India's total trade surplus with the U.S., which was $58.2 billion in 2025 [1].
The Indian diaspora in the Gulf, numbering over 9 million, plays a crucial role in supporting India's finances and reducing its current account deficit [1]. Indian workers in the region are primarily employed in oil services, construction, hospitality, and retail sectors, all of which are particularly vulnerable to disruptions caused by Iranian attacks [1]. Alexandra Hermann, lead economist at Oxford Economics, warned that a sharp decline in remittance inflows, especially if accompanied by higher oil prices due to the conflict, could worsen India's external position and put pressure on the rupee [1].
Remittances from the UAE alone contribute nearly one-fifth of India's total flows, second only to the U.S. at 27.7% [1]. Experts note that only a prolonged conflict would significantly dent India's remittance flows and impact the economy, but uncertainty remains regarding the duration of hostilities [1]. Deepa Kumar of S&P stated that if the conflict lasts beyond six months, it will have a material impact on the Indian economy, while a contained conflict may cause initial shocks limited to spot worker contracts [1].
The U.S.-Iran war is currently in its sixth day and is spreading across the region, with U.S. embassies in Riyadh and Kuwait coming under attack [1]. U.S. Secretary of State Marco Rubio has vowed to intensify the offensive against Iran, and President Donald Trump indicated that the military operation could last "far longer" than the estimated four to five weeks [1]. Analysts are beginning to assess the potential effects of a prolonged conflict on India's economy, as the likelihood of extended hostilities increases [1].
CONCLUSION
India's economy faces high risks from the deepening U.S.-Iran conflict, particularly due to potential disruptions in remittance flows from the Gulf region. If the conflict persists beyond six months, experts warn of material impacts on India's external position and currency. The situation remains fluid, with analysts closely monitoring developments and their implications for India's financial stability.