Commentary: Will US-Iran talks bring about new trade routes for India and China?

Commentary: Will US-Iran talks bring about new trade routes for India and China? For Asia, the US-Iran memorandum of understanding reopens the possibility of new routes, supplies and strategic options, says geoeconomics researcher Hao Nan. ABU DHABI: The US-Iran memorandum of understanding (MOU) has been read mainly as a ceasefire document, a nuclear pause and a possible opening for lasting sanctions relief. The immediate questions are whether Iran will accept verifiable limits, whether the Strait of Hormuz will remain open, and whether Israel will tolerate an agreement it did not fully shape. But for Asia, the larger question is whether Iran can again connect it to the Middle East and Europe. This matters directly for India, China and Southeast Asia. Iran’s location has always been powerful. It connects India to Afghanistan and Eurasia, and China to Turkey and Europe. But because of decades-old sanctions, Iran’s location was not usable. The MOU may not change that overnight, but it makes Iran’s geography discussable again. If Iran’s geography becomes economically usable, it can support new routes, supplies and strategic options. But if it is militarised again, it becomes a chokepoint risk that Asia must work around. HIGH STAKES FOR INDIA India has the most direct stake. For New Delhi, Iran is both an energy-security problem and a connectivity opportunity. The safe passage of Indian-flagged tankers through Hormuz after the MOU showed the immediate significance of de-escalation. India cannot treat the Iran crisis as a distant Middle Eastern conflict when its oil, seafarers and shipping routes pass through the same contested waterway. Hormuz is not only a global energy chokepoint; it is part of India’s economic bloodstream. But India’s interest goes beyond oil. The Chabahar port, located on Iran’s southeastern coast, remains one of New Delhi’s most important strategic connectivity projects. It offers a trade route to Afghanistan and Central Asia while bypassing Pakistan. India signed a 10-year agreement in 2024 to develop and operate the Iranian port. If the US-Iran MOU creates more predictable sanctions conditions, Chabahar could regain momentum. If not, it will remain politically useful but commercially constrained. OPPORTUNITIES FOR CHINA China’s interest is different but no less important. Beijing needs the Gulf to remain stable because a large share of the oil moving through Hormuz is destined for Asia, with China and India among the largest recipients. A renewed closure or partial disruption of the strait would raise prices, complicate shipping and reinforce Chinese concerns about maritime dependence. For Beijing, the US-Iran MOU is therefore not just about Tehran or Washington. It is about the reliability of energy flows from the wider Gulf. China also has a specific Iran angle. A temporary easing of restrictions on Iranian oil may not transform Asian buying patterns immediately, especially when many refiners are already well supplied. But Chinese independent refiners are better positioned than most to absorb Iranian barrels, especially for processing and stockpiling. De-escalation helps China by lowering maritime risk and keeping discounted Iranian supply accessible. Yet the reintegration of Iran under Western-shaped rules could also reduce China’s privileged access to cheap Iranian oil. THE FINAL SHAPE OF THE IRAN QUESTION For Singapore and Southeast Asia, the implications are less about direct involvement in Iranian corridors and more about the cost of instability. Southeast Asia depends heavily on imported energy and concentrated maritime routes. The International Energy Agency has warned that before the crisis, around 60 per cent of Southeast Asia’s crude oil imports and a third of its gas imports came from the Middle East. Any instability around Hormuz therefore affects electricity prices, transport costs, food prices and inflation. This is why the final shape of the Iran question matters. There are three broad possibilities. The first is controlled reintegration. In this scenario, the MOU holds, nuclear monitoring becomes credible, sanctions relief is usable, Israel is restrained or reassured, and Hormuz remains open. Iran would not become normal, but it would become usable. The second is grey-zone connectivity. This is more likely. There is no grand bargain, but no full-scale war either. Sanctions remain uneven, Israel conducts limited operations, Iran keeps Hormuz mostly open, and selected trade continues through waivers, informal understandings and non-Western networks. India and China would use Iran selectively, while Singapore and Southeast Asia would still price in risk. Iran would be neither fully reintegrated nor fully isolated. It would become a contested but usable hub. The third is renewed militarised containment. If the MOU collapses, Israel expands strikes, Iran again weaponises Hormuz, and the US restores maximum pressure. India and China’s Iran-centred projects will stall. Southeast Asia would face higher energy and insurance costs. In this outcome, Iran’s geography would remain important, but as a risk to be bypassed rather than an asset to be used. The MOU has not solved the Iran problem. It has only reopened the question of what Iran will become after war: a corridor, a grey-zone hub or a chokepoint risk. For India, China and Southeast Asia, that distinction matters. Iran’s nuclear file may dominate diplomacy, but its geography will shape the economic consequences. The postwar Iran question is therefore not just whether Tehran can be constrained. It is whether Iran can be made usable without being destabilising again. Hao Nan is a Susan Strange Associate Fellow with the Helsinki Geoeconomics Society.