India and Pakistan lurch toward renewed conflict

INDIA

With trade frozen, communication limited and trust scarce, a single terror attack could rapidly reignite hostilities between the nuclear-armed neighbours within the next 12 months.

INDIA and Pakistan remain at significant risk of renewed military conflict despite last year’s ceasefire, with analysts warning that a single major terrorist attack could rapidly drag the nuclear-armed rivals back towards war.

A new assessment by Sibylline puts the probability of renewed kinetic conflict between the neighbours at 41% over the next 12 months, underscoring the fragility of a ceasefire that has done little to resolve the underlying disputes.

While an uneasy ceasefire remains the most likely outcome, analysts say a single major trigger event could rapidly reignite hostilities between the nuclear-armed rivals.

The report argues that while the guns have fallen silent since the four-day conflict triggered by India’s Operation Sindoor in May 2025, almost none of the underlying disputes have been resolved.

Trade remains suspended, visas remain restricted and the two countries maintain only minimal communication. Rather than moving towards reconciliation, the relationship is being held together by deterrence and crisis-management mechanisms designed to prevent accidental escalation.

“There is not any material movement towards resolving the issues between the two countries,” says report author Aedan Mordecai, lead Asia Pacific analyst.

“There is very minimal communication and all the underlying factors that could help conflict re-emerge at some point remain in place.”

That absence of progress is reflected in the report’s most likely scenario, which assigns a 45 per cent probability to the ceasefire holding through the next year. Yet even this outcome is described less as peace than as a frozen confrontation.

“The two biggest economies in the region don’t really talk to each other,” Mordecai says.

“There is barely any trade, barely any people-to-people interaction and very little that ties them together.”

The report identifies one of the most significant changes since the conflict as India’s increasingly hardline position towards future attacks linked to Pakistan.

Following Operation Sindoor, New Delhi repeatedly stated that any future attack attributable to Pakistan would be treated as an act of war.

Analysts believe that has lowered the threshold for future escalation.

“It is not really a position they can go back on,” Mordecai says.

The concern is not necessarily that either government wants another conflict. Rather, political leaders may find themselves with less room for restraint when the next crisis arrives.

That risk is amplified by the threat posed by militant groups operating in the region.

India’s counter-terrorism capabilities have improved substantially since the Mumbai attacks of 2008, but analysts note that preventing every attack indefinitely remains almost impossible.

More troublingly, militant organisations may view a confrontation between India and Pakistan as a strategic success in itself.

“Not only does an attack have the impact of being an attack,” Mordecai says, “it potentially triggers a war between Pakistan and India, which many militant groups would be quite happy to see.”

The report’s second major concern is water.

India continues to regard the Indus Waters Treaty as suspended following last year’s conflict and has explored infrastructure projects that Pakistan views with deep suspicion.

The treaty, brokered in 1960 with World Bank involvement, has survived wars, crises and decades of hostility. Its current uncertain status highlights the deterioration in bilateral relations.

“It is a real concern,” Mordecai says. “For agriculture, food security, water security and livelihoods, it is hugely important to Pakistan.”

Analysts caution that water remains more a source of political tension than an immediate trigger for conflict. Yet they warn that it is becoming increasingly intertwined with broader strategic competition between the two countries.

The report also points to China’s growing importance.

Beijing has become Pakistan’s most important strategic partner through military co-operation, arms sales and investment linked to the China-Pakistan Economic Corridor. Chinese-made fighter aircraft played a prominent role during last year’s conflict, while Beijing continues to deepen security ties with Islamabad.

Mordecai describes China as an increasingly important strategic backstop for Pakistan and suggests Beijing could emerge as the most influential external actor in any future crisis.

The economic implications of renewed conflict would extend far beyond South Asia. India has spent more than a decade attempting to position itself as a manufacturing alternative to China through initiatives such as “Make in India”, encouraging international firms to diversify supply chains and shift production into the country.

That effort has taken on added importance as Western governments and businesses seek alternatives to Chinese manufacturing and pursue “China Plus One” strategies. Analysts warn that another military confrontation could undermine India’s appeal by raising questions about its long-term stability.

“If you’re an investor deciding where to build a factory, and there have been two wars in three years, India becomes a harder sell,” Mordecai says.

The prospect of nuclear escalation inevitably hangs over any discussion of India-Pakistan relations.

Yet the report argues that the greater danger lies not in a deliberate decision to use nuclear weapons, but in the possibility that a conventional conflict spirals beyond the control of either side.

One scenario envisages weeks of sustained fighting, naval deployments and nuclear signalling as both governments struggle to find a politically acceptable off-ramp.

“I would hope nobody ever presses that button,” Mordecai says.

“Once a conflict starts, the real question becomes who is trying to contain nuclear escalation, what mechanisms exist to stop escalation, and whether those mechanisms are still functioning.”

Even without a nuclear exchange, the consequences would be severe. The report warns that a prolonged conflict could disrupt international supply chains, undermine investor confidence, damage critical infrastructure and cause thousands of casualties across South Asia.

For now, the ceasefire remains intact.

But the report’s overall assessment is stark.

The relationship between India and Pakistan is not becoming healthier. It is simply remaining stable enough to avoid another war.

“There is very little that ties them together,” Mordecai says. “And that means there is very little pulling them away from another crisis.”

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