India has vital interests in the Middle East. In the Gulf alone, India has close to 9 million residents. This region is a significant source of Indian oil and gas imports as well as remittances, especially to the state of Kerala.
Importantly, India hoped that this region will serve as a transit route to Afghanistan and Central Asia, including through the Iranian port of Chabahar. India even has a sanction exemption for it from the US.
The balancing act
Perhaps, the biggest challenge for India is to balance the entire act. The government has tried to walk a tightrope over the past few years maintaining ties with Iran, Saudi Arabia, and Israel and being extremely cautious of not antagonising America at the same time.
The US, unlike in the past, has refrained from appearing hostile toward's prime minister Modi's stance on Pakistan. It did not even condemn India's Balakot strike or the abrogation of article 370 and the Citizenship Amendment Act
The US is India's second-largest trading partner after China and a superpower which India doesn't want to work against. Especially, after Trump's significant remarks about Soleimani having had a key role in the attack on an Israeli diplomat in Delhi.
For the second time, New Delhi is finding itself at the crossroads due to the ongoing tensions between Iran and Iraq.
Before the US invasion of Iraq in 2003, India's ties with the country suffered due to the UN sanctions on Iraq. But India soon developed trade within the oil-for-food program, which permitted Iraq to export oil for essential goods.
After the US invasion of Iraq, India maintained a neutral stance and had even condemned military action against Iraq but later almost joined the coalition under the US backroom diplomacy only to eventually back off due to public sentiment and opposition protests.
More recently, the US sanctions on Iran have forced India's hand on the most vital commodity - oil. Iran's foreign minister Javad Zarif stated that India must stand up to the bully.
India has managed to make up for the loss of Iranian oil with other imports but PM Modi knows that oil is a commodity that can cause a massive political upheaval in India.