The following excerpt is from “From Hormuz to Households: The Impacts of the Middle East Crisis on the Indian Economy,” ORF Special Report No. 310, Observer Research Foundation, June 2026.
The India–Middle East–Europe Economic Corridor (IMEC), unveiled at the G20 Summit in New Delhi in 2023, was conceived as strategic insurance: a multimodal services architecture designed to insulate trade between the Indian Ocean and the Mediterranean from the concentration risk of any single chokepoint.[1] However, the corridor now faces a more searching test than its architects anticipated. Since February 2026, when a joint United States (US)-Israel campaign against Iran triggered Tehran’s closure of the Strait of Hormuz, the same sea lines that IMEC was designed to traverse have become the global economy’s most distressed maritime artery.[2]
This article argues that the conflict has produced a strategic paradox. It has simultaneously reaffirmed IMEC’s underlying logic of diversification away from concentrated chokepoints; and complicated its implementation, as the corridor’s own physical nodes pass through the current conflict zone. Whether IMEC survives geopolitical fragmentation depends not on whether the conflict ends, but on whether the corridor’s architecture is recalibrated to reflect a more honest assessment of risk.
The IMEC Architecture and Its Assumptions
IMEC is best understood not as a single transport route, but as a multimodal services architecture spanning three integrated pillars: a transport pillar combining rail and shipping; an energy pillar centred on electricity and energy interconnection; and a digital pillar of cross-border digital infrastructure.[3] Its design promises a 40-percent reduction in transit time and a 30-percent reduction in logistics costs.[4] For India, the corridor’s structural significance was highlighted even before the Strait of Hormuz crisis. The European Union (EU) accounts for over 12 percent of merchandise trade but the Red Sea crisis of 2023–24 forced rerouting around the Cape of Good Hope and added roughly 3,500 nautical miles along with a week to transit, demonstrating the cost of route concentration.[5]
Yet IMEC’s design has rested on three ambitious assumptions. First, that a continuous land bridge through Saudi Arabia, Jordan, and Israel would benefit from progressive Saudi- Israeli normalisation. Second, that the corridor’s maritime entry points like the Jebel Ali and Fujairah ports would remain physically secure within a stable Gulf. Third, that financing risks would remain manageable within conventional infrastructure markets, despite the absence of a centralised implementing body.[6],[7] The 2026 Hormuz crisis has placed all three assumptions under simultaneous stress.
The conflict has impacted IMEC through three channels: physical, financial, and political. Iran’s closure of the Strait of Hormuz has reduced shipping through the Strait—which pre-conflict averaged 178 transits per day—by 95 percent.[8] The United States has assessed that fully clearing Iranian-laid mines could take up to six months.[9] As IMEC’s eastern leg is anchored in Gulf ports lying inside or immediately adjacent to the Strait, its maritime entry is effectively co-located with the world’s most contested chokepoint.
The financial impact is seen in the swift and severe repricing and partial withdrawal of warrisk insurance. Hull war insurance premiums rose from 0.25 percent to 1 percent of insured ship value per transit as the crisis unfolded, while the Joint War Committee of the Lloyd’s Market Association extended its “high-risk” designation to the entire Persian Gulf.[10],[11] Maritime analysts now estimate that, even after re-opening, transit insurance could cost up to 20 times higher than pre-conflict levels.[12] For an infrastructure project whose private-sector commercial case rests on predictable transit and risk-pricing, this could be a fundamental revision in the cost of capital.
The third and final impact is political. The conflict has surfaced the corridor’s reliance on political actors external to the IMEC framework. The Hormuz crisis has moved the disruption from the corridor’s edge to its centre. This has exposed Gulf economies, which were IMEC’s capital engine, to active military threat and made the corridor harder to invest in till security conditions remain unresolved.[13] Multiple states in the region received Iranian retaliatory strikes despite their noninvolvement in the US-Israel military campaign against Iran, due to their closeness to the US and the US military bases they host.[14] This presents complications for the Gulf to publicly align with a US-Israeli infrastructure project while Iranian retaliation is still hitting Gulf infrastructure.
Impact on Viability
The paradox of IMEC’s viability lies in the contrast between the growing need for the corridor and the declining ease of its implementation. The Iran conflict has simultaneously compounded the urgency of the corridor and made its implementation more difficult. For India, the strategic stakes are particularly acute. Just days before the outbreak of the conflict, Prime Minister Narendra Modi concluded a state visit to Israel, addressing the Knesset (the Parliament) and reaffirming IMEC as an important component of India’s connectivity strategy.[15] IMEC formed part of two important Indian grand connectivity initiatives, the second being the International North–South Transport Corridor (INSTC) through Iran, designed to facilitate the movement of Indian goods to Russia, Europe, and Central Asia via Chabahar Port.[16] However, the Iran conflict has made the INSTC harder to operationalise, leaving IMEC as the sole viable bet for cutting transit costs to Europe.
For the other signatories, the conflict has triggered similar recalibrations. The UAE, IMEC’s foundational maritime hub, has been the target of the highest number of Iranian missile and drone strikes amongst the Gulf countries since the war begun on 28 February.[17] This increases the UAE’s incentive to diversify away from Hormuz. Similarly, Saudi Arabia, the indispensable land bridge, has not only been hit by Iranian retaliatory strikes but operates an oil pipeline that remains vulnerable to disruptions in the Red Sea, making IMEC even more attractive.[18] The United States, while presiding militarily over the conflict, has continued to publicly elevate IMEC and most recently commented on its growing importance.[19] The EU has avoided any military involvement in the conflict but faces supply chain disruptions in its manufacturing and LNG trade.[20] Israel remains at the frontline of the conflict, which leaves the corridor’s Mediterranean exit at Haifa hostage to the security situation.[21] Therefore, the corridor has become both more necessary and less feasible.
In the short term, the conflict has placed IMEC’s physical implementation on hold. While geopolitical constraints limit its full potential, India and the UAE are reinforcing the “foundational leg” through digital initiatives like the Virtual Trade Corridor.[22] However, the commercial value of the corridor is contingent on physical and political flows that have been throttled. The physical infrastructural development cannot proceed at the planned pace while regional airspace and waters remain uninsurable.
If the conflict lingers, three structural shifts will become difficult to reverse. First, privatesector confidence in cross-Gulf infrastructure will be repriced. Institutional investors might allocate smaller percentages of their portfolios to infrastructure and demand sovereign or multilateral backstops on a scale that IMEC’s decentralised governance does not currently provide. Second, alternative connectivity architectures like the Trans-Caspian Middle Corridor, which already saw a rise in container demand following the Hormuz disruption, will entrench themselves in commercial logistics decisions.[23],[24] This is critical as path dependence in shipping can be difficult. Third, the corridor’s service-led layer in the digital pillar risks being eclipsed by the security crisis at the physical layer, even though that pillar is precisely the component that could continue to advance independently. The deeper structural challenge is that IMEC envisions financial integration, customs digitalisation, and port-to-port data flows that depend on trust frameworks that geopolitical fragmentation makes harder to construct.[25] Even between mature partners such as the United States and the European Union, cross-border data-sharing frameworks have repeatedly faltered, extending such frameworks across the conflict-stressed Gulf will be considerably more demanding.[26]
Can IMEC Survive Geopolitical Fragmentation?
The answer is conditional, and the condition is demanding: IMEC can survive geopolitical fragmentation, but not in its present institutional form. Three structural revisions will determine whether the corridor persists as a living commercial platform or calcifies into an increasingly deferred geopolitical aspiration.
The first imperative is the formalisation of governance. The corridor’s most consequential vulnerability might be institutional. In its current format, IMEC has established a clear declaration of intent but needs a concrete implementation plan and a central coordinating mechanism.[27] Without a central coordinating body, each signatory can quietly defect from commitments while publicly affirming them. The Hormuz crisis has made this governance vacuum urgent: the corridor cannot triage its pillars, negotiate sovereign risk guarantees, or mobilise multilateral financing without a secretariat empowered to act. The 2026 G20 cycle, under the United States presidency, offers a credible convening architecture.[28] Washington also holds both the political capital and the multilateral leverage to establish a formal IMEC coordinating body. The question is whether it can deploy that capacity with the urgency needed before path dependence in commercial logistics renders IMEC less relevant.
The financing question deserves particular scrutiny, because IMEC was conceived without any binding financial constraints and early estimates have stated that it could cost up to US$8 billion to build.[29] However, it is unclear how this financial burden will be shared. The European Union and United States funds are stretched and Gulf sovereign capital is simultaneously absorbing the costs of elevated defence expenditure and regional reconstruction. Therefore, the harder question is whether the residual gap can be plugged by private capital under present conditions. The answer is unlikely without structural intervention.
The second revision involves diversifying maritime entry and exit points. The corridor’s physical exposure to Hormuz can be partially corrected. In the original agreement, the UAE’s Khalifa Port was designated as one of IMEC’s principal hubs, but Fujairah port on the Gulf of Oman could assume greater importance for IMEC’s eastern leg, precisely because it bypasses the Strait.[30] The UAE’s Abu Dhabi Crude Oil Pipeline, which already routes energy exports from Habshan to Fujairah, demonstrates that this underlying infrastructure logic is both technically proven and commercially live.[31] Therefore, Fujairah reduces Hormuz exposure and diversifies away from Strait-dependent maritime logistics. A similar diversification would need to be construed around the Haifa port.
The third dimension demands a certain degree of decoupling of the three pillars. The conflict has produced a category error of treating IMEC as a single project whose commercial viability rises and falls with the physical security environment. The transport pillar is genuinely constrained, but the digital pillar faces materially lower geopolitical impediments. The India-UAE Virtual Trade Corridor already demonstrates that services-layer integration can advance independently of kinetic conditions. Each pillar can carry its own financing structure, investment timeline, and diplomatic track, insulating the corridor’s achievable components from the security paralysis afflicting its physical layer. The advancements in the digital pillar can then provide the “proof of concept” needed to inspire trust in institutional investors, encouraging them to further the development of the other pillars.
It would be important to materialise these changes with swift efficiency and urgency. Container traffic through the Trans-Caspian Middle Corridor grew significantly in the aftermath of the Hormuz crisis. Such route choices, once embedded in carrier contracts and insurance frameworks, become self-reinforcing and difficult to reverse.[32] IMEC’s survival is therefore not a function of when the missiles fall silent. It is also a function of whether its architects can move faster than the commercial gravitational pull of the alternatives that are already filling the void.
The deepest insight from the 2026 crisis is that IMEC was always less of a corridor and more of an architecture. Architectures are recalibrated, not abandoned, when their assumptions fail. Any successful recalibrated framework will need to build a security architecture that does not depend entirely on American capacity and is designed around the actors in the original framework, rather than treating their disruption as residual risk, as they remain the most invested in its success.[33]
Conclusion
The 2026 Hormuz crisis has not invalidated IMEC. Instead, it has stress-tested the corridor with a severity its architects did not model, and the results are instructive. While the crisis has made IMEC harder to operationalise, this should not be a reason for its abandonment. The corridor’s underlying strategic logic, reducing dependence on chokepoints, has been vindicated with precise clarity and offers the most compelling argument for its redesign.
The corridor that emerges from this period will need to look different from the one unveiled in 2023. It will require a formal coordinating secretariat, rethinking the maritime architecture, and approaching its three pillars independently. Most urgently, it will require speed. IMEC’s architects face a narrow window in which institutional reform can deliver the transformative impact IMEC was envisioned for.
Samriddhi Vij is Associate Fellow, Geopolitics, ORF Middle East.
Acknowledgement
AI (Claude) was used to conduct research and write citations.
Endnotes
[1] Afaq Hussain and Nicholas Shafer, “The India-Middle East-Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty,” Atlantic Council, 2025, https:// www.atlanticcouncil.org/in-depth-research-reports/ report/the-india-middle-east-europe-economic-corridorconnectivity- in-an-era-of-geopolitical-uncertainty/.
[2] House of Commons Library, “Israel/US-Iran Conflict 2026: Reopening the Strait of Hormuz,” UK Parliament, 2026, https://commonslibrary.parliament.uk/researchbriefings/ cbp-10636/.
[3] Hussain and Shafer, “The India-Middle East-Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty”.
[4] Nilanjan Ghosh, “IMEC and the Future of Global Connectivity,” Observer Research Foundation, January 8, 2026, https://www.orfonline.org/expert-speak/imecand- the-future-of-global-connectivity.
[5] Ghosh, “IMEC and the Future of Global Connectivity”.
[6] Mohamed ELDoh, “Israel-Iran War Casts Shadow Over IMEC Corridor Ambitions,” Geopolitical Monitor, June 19, 2025, https://www.geopoliticalmonitor.com/israel-iranwar- casts-shadow-over-imec-corridor-ambitions/.
[7] “India-Middle East-Europe Economic Corridor (IMEC) Conclave: Opportunities, Challenges, and the Path Forward,” Council for International Economic Understanding (CIEU), GeoEconomic Hub, RIS, Dalberg, April 16, 2025, https://cieu.in/assetsweb/images/ IMEC_Conclave_2025_Summary_report_1752842596. pdf.
[8] Matt Strahan and Daniel Murphy, “How War in the Middle East is Turning Governments into Insurers of Last Resort,” World Economic Forum, 2026, https:// www.weforum.org/stories/2026/04/how-middle-east-warturning- governments-into-insurers-last-resort/.
[9] Yashraj Sharma, “When Will Strait of Hormuz be ‘Safe’ for Commercial Shipping Again?,” Al Jazeera, April 28, 2026, https://www.aljazeera.com/features/2026/4/28/when-willstrait- of-hormuz-be-safe-for-commercial-shipping-again.
[10] Ben Dyson, “Marine War Insurance for Hormuz Dries Up as Middle East War Intensifies,” S&P Global, March 3, 2026, https://www.spglobal.com/marketintelligence/ en/news-insights/articles/2026/3/marinewar- insurance-for-hormuz-dries-up-as-middle-east-warintensifies- 99283143.
[11] Strahan and Murphy, “How War in the Middle East is Turning Governments into Insurers of Last Resort”.
[12] Sharma, “When Will Strait of Hormuz be ‘Safe’ for Commercial Shipping Again?”.
[13] Islam Alhalawany, “Too Much at Stake, Too Little Room to Move: India, IMEC and the US-Iran War,” Italian Institute for International Political Studies (ISPI), April 2, 2026, https://www.ispionline.it/en/publication/toomuch- at-stake-too-little-room-to-move-india-imec-andthe- us-iran-war-234273.
[14] Ellen Clarke, Noor Hammad and Asna Wajid, “Mapping the Damage: Iranian Strikes on the GCC,” International Institute for Strategic Studies (IISS), March 27, 2026, https://www.iiss.org/online-analysis/online-analysis /2026/03/mapping-the-damage-iranian-strikes-on-thegcc/.
[15] Sarah Shamim, “India-Israel Axis: What Are the IMEC Corridor, I2U2 Grouping Modi Spoke of?,” Al Jazeera, February 26, 2026, https://www.aljazeera.com/ news/2026/2/26/india-israel-axis-what-are-the-imeccorridor- i2u2-grouping-modi-spoke-of.
[16] Priyanka Salve, “Iran War Set to Determine India’s Trade Route to Europe,” CNBC, March 12, 2026, https://www. cnbc.com/2026/03/12/us-israel-iran-india-trade-europe. html.
[17] Clarke, Hammad and Wajid, “Mapping the Damage: Iranian Strikes on the GCC”.
[18] Samriddhi Vij, “Double Chokepoint: Impact of a Hormuz and Bab al-Mandeb Closure,” ORF Middle East, April 23, 2026, https://orfme.org/expert-speak/double-chokepointimpact- of-a-hormuz-and-bab-al-mandeb-closure/.
[19] Keshav Padmanabhan, “Dead on Arrival to Revival: IMEC Regains Momentum as India, UAE & US Look for New Trade Route,” The Print, April 16, 2026, https:// theprint.in/diplomacy/dead-on-arrival-to-revival-imecregains- momentum-as-india-uae-us-look-for-new-traderoute/ 2906240/.
[20] Vij, “Double Chokepoint: Impact of a Hormuz and Bab al-Mandeb Closure”.
[21] ELDoh, “Israel-Iran War Casts Shadow Over IMEC Corridor Ambitions”.
[22] Padmanabhan, “Dead on Arrival to Revival: IMEC Regains Momentum as India, UAE & US Look for New Trade Route”.
[23] “Trans-Caspian International Transport Route,” International Association Trans-Caspian International Transport Route (TITR), 2026, https://middlecorridor. com/en/.
[24] Tural Heybatov, “Middle Corridor Faces New Crisis: Key Challenges Ahead,” Caspian Post, March 10, 2026, https:// caspianpost.com/analytics/middle-corridor-faces-newcrisis- key-challenges-ahead.
[25] Nicholas Shafer and Afaq Hussein, “The India-Middle East-Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty,” Atlantic Council, August 2025, https://www.atlanticcouncil.org/wpcontent/ uploads/2025/08/The-India-Middle-East- Europe-Economic-Corridor-Connectivity-in-an-era-ofgeopolitical- uncertainty.pdf.
[26] “EU-US Data Exchange Proposal in Conflict with EU Laws,” Statewatch, 2026, https://www.statewatch.org/ analyses/2026/eu-us-data-exchange-proposal-in-conflictwith- eu-laws/.
[27] Hussain and Shafer, “The India-Middle East-Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty”.
[28] Hussain and Shafer, “The India-Middle East-Europe Economic Corridor: Connectivity in an Era of Geopolitical Uncertainty”.
[29] Karen Young, “War Delays but Likely Will Not Fully Derail IMEC Plans,” Middle East Institute, November December 5, 2025, https://mei.edu/publication/war-delays-likelywill- not-fully-derail-imec-plans/.
[30] Fabio Indeo, “Reshaping the India-Middle East- Europe Economic Corridor: New Challenges, Old Vulnerabilities,” TRENDS Research & Advisory, February 15, 2026, https://trendsresearch.org/insight/reshapingthe- india-middle-east-europe-economic-corridor-newchallenges- old-vulnerabilities/.
[31] Tsvetana Paraskova, “Fujairah in Focus as Oil Flows Reroute Around Hormuz Crisis,” OilPrice.com, 2026, https://oilprice.com/Energy/Crude-Oil/Fujairah-in-Focusas- Oil-Flows-Reroute-Around-Hormuz-Crisis.html.
[32] Alberto Rizzi, “The Infinite Connection: How to Make the India-Middle East-Europe Economic Corridor Happen,” European Council on Foreign Relations (ECFR), 2024, https://ecfr.eu/publication/the-infinite-connectionhow- to-make-the-india-middle-east-europe-economiccorridor- happen/.
[33] Alhalawany, “Too Much at Stake, Too Little Room to Move: India, IMEC and the US-Iran War”.