India and Iran have had a historically strong trade relationship, particularly dependent on Iran supplying crude oil to India in exchange for various exports including food, medicine, and machinery. This balance was disrupted after 2018 when the U.S. government, under President Donald Trump, withdrew from the Joint Comprehensive Plan of Action, which was aimed at regulating Iran's nuclear program. Following this decision, stringent economic sanctions were re-imposed on Iran, significantly impacting its trade relationships, particularly with countries like India that relied heavily on Iranian oil for energy needs.

Since 2019, India has almost completely halted its oil purchases from Iran due to the constraints imposed by these sanctions, which also adversely affected banking and payment channels between the two nations. This drastic change has led to an estimated 87% plunge in total trade volume between India and Iran. By 2020, India's exports to Iran were valued at approximately $3.37 billion, while imports dwindled to around $1.39 billion. Although oil imports had already diminished significantly, some trade persisted, but the overall dynamics were far from stable, reflecting a broader geopolitical shifting.

The ongoing repercussions of these sanctions not only highlight the fragility of the India-Iran trade relationship but also underline India's delicate balancing act between maintaining ties with Iran and adhering to U.S. policy. The future of this relationship remains uncertain, especially in light of changing international dynamics and Iran's continuing economic struggles due to sanctions, which will likely influence India's approach in the coming years.