Ongoing chaos in the Middle East has kept the crucial Strait of Hormuz under pressure for over three months, disrupting one of the world's busiest energy corridors and sending ripples across nations. Amid this turmoil, India may have quietly found a Plan B in Oman. According to the Global Trade Research Initiative (GTRI), India's free trade agreement with Oman, which comes into effect on June 1, could help maintain trade and energy supplies when the Gulf region faces disruptions.
Strategic Significance Beyond Trade
While the trade gains from the Comprehensive Economic Partnership Agreement (CEPA) may be modest due to Oman's relatively small market, its geographic location makes it a valuable gateway for India when traditional Gulf shipping routes are under pressure. Oman, with a population of 5.5 million and a GDP of around $110 billion, is not among India's largest export destinations. However, unlike several Gulf economies that rely heavily on the Strait of Hormuz for maritime access, large parts of Oman's coastline lie along the Arabian Sea and the Gulf of Oman.
GTRI stated, "The trade pact with Oman holds strategic significance for India, as much of Muscat's coastline lies outside the Strait of Hormuz, unlike other Gulf nations, enabling it to remain a reliable trade and energy gateway for India even during regional conflicts, disruptions, or geopolitical instability." The think tank emphasized that the agreement should be viewed not only through the lens of commerce but also as a step toward strengthening India's long-term energy and economic security.
Oman's Geographic Advantage
Explaining the significance of Oman's location, GTRI founder Ajay Srivastava noted that ports such as Salalah and Duqm remain accessible even when movement through the Strait of Hormuz is affected. "Unlike most Gulf countries, which rely on shipping through the Strait of Hormuz, much of Oman's coastline is located outside the Strait, directly on the Arabian Sea and the Gulf of Oman. This allows major ports such as Port of Salalah and Port of Duqm to remain accessible even when traffic through the Strait is disrupted. As a result, Oman can continue serving as a reliable trade and energy gateway during periods of conflict or instability in the Gulf," Srivastava said.
Trade Trends Highlight Advantage
Recent trade trends have underscored this advantage. As trade with major Gulf economies weakened, India's imports from those countries fell from around $15 billion in April 2025 to $9.8 billion in April 2026. Exports to the region also declined, dropping from $4.4 billion to $2.7 billion. However, Oman emerged as an exception during this period. Imports from Oman rose sharply by 246.4%, increasing from $430 million to nearly $1.5 billion, supported by higher imports of crude oil and urea. Exports from India to Oman registered a comparatively smaller decline of 10.3%. "The experience shows that Oman can act as a dependable alternative trade and energy gateway for India when the Strait of Hormuz becomes risky or congested," Srivastava added.
The US-Iran war has disrupted shipping through the Strait of Hormuz, a route that carries around one-fifth of global daily oil consumption and a quarter of worldwide seaborne oil trade. The disruption has affected energy supplies reaching India from Saudi Arabia, Qatar, and the UAE, while also pushing up crude oil prices.
Key Provisions of the India-Oman Trade Pact
Under the agreement, Oman will provide immediate duty-free access on approximately 98% of its tariff lines, covering about 99% of India's exports by value. Indian exports to Oman were valued at about $4 billion in fiscal 2026, led by refined petroleum products including petrol ($781 million) and naphtha ($746 million), along with calcined alumina, iron and steel products, machinery, and rice. Srivastava noted that more than 80% of Indian products were already entering Oman at average tariff rates of about 5%, though some goods faced duties of up to 100%. "Their elimination is expected to improve the competitiveness of Indian goods in the Omani market, though export growth will inevitably be constrained by the country's relatively small population and market size," he said.
Benefits for Oman
For Oman, the agreement is expected to reinforce its existing role as a supplier of energy products, fertilizers, and industrial raw materials to India. India imported goods worth $7.2 billion from Oman during fiscal 2026, with crude oil accounting for $1.6 billion, liquefied natural gas for $1.2 billion, and fertilizers for $843 million. Imports also included methanol ($465 million) and ammonia ($424 million). In return, India will reduce or eliminate tariffs on nearly 78% of its tariff lines under the CEPA. "The CEPA therefore strengthens a relationship that is as much about securing reliable supplies of energy and industrial inputs as it is about expanding bilateral trade," Srivastava said.
The agreement, signed on December 18, 2025, will be India's fifth free trade agreement implemented in the last five years and the 15th such pact overall.
