• Following a deadly attack in Kashmir, India and Pakistan have implemented retaliatory trade measures, including port bans and airspace closures.
• Unofficial trade between India and Pakistan, estimated at $10 billion annually, occurs via third countries like UAE, Sri Lanka, and Singapore to bypass restrictions.
• The closure of airspace and trade routes is causing flight rerouting, increased costs, and disruptions to pharmaceutical imports for Pakistan, along with impact on Afghanistan trade.

Following a deadly attack in Kashmir, tensions between India and Pakistan have escalated, leading to a series of retaliatory measures impacting trade and travel. India has imposed a ban on imports from Pakistan and barred Pakistani vessels from entering Indian ports. In response, Pakistan has banned Indian-flagged ships from its ports. Furthermore, Pakistani airspace is closed to Indian airlines, causing flight rerouting and increased travel times. Concerns are growing about unofficial trade between the two countries, which is estimated to be significantly higher than official figures, and efforts are underway to curb this practice.

• What: India and Pakistan are engaged in escalating trade tensions involving port bans, airspace closures, and scrutiny of unofficial trade routes following a deadly attack in Kashmir.
• Who: Key actors include the governments of India and Pakistan, airlines such as Air India and IndiGo, and traders involved in unofficial trade.
• When: The events unfolded after April 22, 2025, following an attack in Indian-administered Kashmir. Trade bans and flight disruptions are ongoing as of early May 2025.
• Where: The primary locations are India and Pakistan, with indirect trade routes involving the UAE, Sri Lanka, and Singapore. Flight rerouting affects routes to Europe, North America, and Central Asia.

The escalating trade tensions between India and Pakistan reflect deeper geopolitical issues and have significant economic consequences. The official trade figures are minimal, but the substantial unofficial trade indicates a strong underlying demand and the limitations of formal restrictions. The closure of airspace and trade routes impacts airlines, increases costs, and disrupts supply chains, particularly for Pakistan's pharmaceutical sector. Efforts to curb unofficial trade face challenges due to the involvement of private entities and the complexities of international trade regulations. The long-term impact will depend on the willingness of both countries to engage in dialogue and address the root causes of the tensions.

This grey-zone strategy highlights how trade adapts faster than policy.

Indian-flagged ships will not be allowed to reach any Pakistani port. Similarly, Pakistani-flagged ships will not visit any Indian port.

Air India regrets the inconvenience caused to our passengers due to this unforeseen airspace closure that is outside our control. We would like to reiterate that at Air India, the safety of our customers and crew remains top priority.

The recent escalation in trade tensions between India and Pakistan, marked by port bans and airspace closures, underscores the fragility of their relationship. While official trade remains limited, significant unofficial trade continues, reflecting unmet demand and the challenges of enforcing trade restrictions. The disruptions to air travel and trade routes highlight the broader economic consequences of the ongoing conflict. The future outlook depends on the willingness of both countries to de-escalate tensions and address the underlying issues driving the conflict, but near term trade and travel disruptions are expected to continue.