Two months after the United States and Israel launched an unprovoked attack on Iran, and after multiple rounds of talks, peace and stability remain elusive.

While the Islamabad-brokered two-week ceasefire brought respite, the current truce is fragile at best. Iran's partial closure of the Strait of Hormuz, a vital channel through which about 20% of global oil supplies pass, has been countered by a total blockade of the strait by the US. Both sides have made threats and counter-threats, and tensions have been building since then. The conflict has once again placed the spotlight on the inability of global bodies such as the United Nations to restrain nations that do not respect international law, especially Israel. It has also exposed the limitations of regional forums such as NATO and BRICS. Given this gloom and doom, any effort to dial down the tensions must be welcomed.

A recent IMF report highlights the global economic pressure caused by this conflict. It notes that in a 'more severe scenario' where energy prices further increase, and energy infrastructure is further damaged, the impact on Emerging Market and Developing Economies (EMDEs) 'would be almost twice that of advanced economies.' In other words, the longer the conflict, the greater the impact on countries like India. For India, the risks include rising energy prices threatening retail inflation, which will feed into consumer goods, fertilisers, and transport, and subdued capital inflows weakening the rupee, thereby further raising import bills. The country's strong foreign exchange reserves and low current account deficit offer short-term relief, but prolonged uncertainty could decelerate growth momentum and weaken fiscal balance. Of particular concern are the lives and livelihoods of over 10 million Indians in the region.