India’s energy security is facing fresh uncertainty following US-Israel military strikes on Iran, which have heightened fears of supply disruptions through the Strait of Hormuz, a vital maritime chokepoint for global oil shipments. According to analysts, almost 50% of India’s crude oil imports around 2.6 million barrels per day transit through the Strait of Hormuz, making any sustained interruption potentially damaging for the country’s economy and energy markets. These concerns have come amid escalating tensions in the Middle East after coordinated strikes killed Iran’s Supreme Leader, prompting Iranian retaliation and fears that shipping routes could be blocked or disrupted.
The Strait of Hormuz, a narrow passage that connects Oman and Iran, is one of the world’s most critical oil transportation routes. Approximately 20% of worldwide crude oil and liquefied natural gas exports flow through it, connecting major Gulf producers to purchasers in Asia, Europe, and beyond. For India, which imports more than 85-88% of its petroleum needs, this route is critical for supplies from important allies such as Iraq, Saudi Arabia, the UAE, and Kuwait. Any obstruction or sustained disruption might have an immediate impact on crude oil prices, India’s import bill, and overall macroeconomic conditions.
Geopolitical Escalation Pushes Crude Prices Higher:
Brent crude oil was trading higher around $72–$73 a barrel as markets reacted to the geopolitical tension, and analysts warned that prices could climb further toward $80 or more if shipping through the Strait of Hormuz is seriously affected. While global crude demand currently holds a surplus relative to supply, market risk premiums are building on expectations that supply chain jitters could tighten available crude volumes and push prices upward.
Experts point out that even if physical supply chains remain intact initially, an extended standoff could drive price spikes before actual shortages materialise, as traders and refiners factor in risk and insurance costs. A prolonged conflict would also likely raise freight and insurance rates for tankers operating in the region, further boosting the cost of transporting oil to India and other importing nations. Investors and markets are closely watching whether OPEC+ producers, including Saudi Arabia, will increase output to compensate for potential supply disruptions. While Saudi officials have indicated readiness to ramp up production if necessary, the ability of additional output to offset a major choke point like Hormuz remains constrained if tensions spread.
Impact on India’s Economy and Energy Security:
For India, a country where energy imports account for a significant share of total crude consumption, higher oil prices would have ripple effects through the economy. Analysts estimate that every $10 rise in crude prices could meaningfully increase India’s import bill and put pressure on the current account deficit while adding to inflationary pressures. Higher energy costs tend to feed through to transportation, manufacturing and consumer prices, complicating efforts by policymakers to maintain price stability and economic growth.
Data shows India’s total crude imports rose to about 5.47 million barrels per day in February after increasing from earlier months, reflecting the country’s broad demand base. Meanwhile, shipments of refined products via the Strait of Hormuz have also increased year-on-year, underscoring how integral the route remains to India’s energy and export logistics.
Apart from crude oil, India receives a large portion of its liquefied petroleum gas (LPG) from Gulf suppliers, much of which also passes via Hormuz. A interruption there might have an impact not only on fuel prices, but also on domestic LPG supply networks, which lack broad substitute infrastructure. Analysts caution that, while crude supplies may be redirected or supplied by alternative sources, LPG remains particularly at risk due to its reliance on Gulf imports and a lack of huge strategic reserves. In addition to energy expenses, the rupee may face pressure from rising oil import bills and global risk-off attitude, potentially leading to financial market volatility. Stocks in industries with high oil input costs, such as aviation, paints, chemicals, and logistics, may see margin compression if prices remain rising, while assets that serve as safe like gold and silver may gain traction.
India’s Strategic Response and Diversification Efforts:
Recognising the risks associated with Hormuz, the Indian government and industry players have been exploring ways to mitigate exposure. This includes diversifying crude sources such as increasing imports from Russia, West Africa and the United States as well as enhancing strategic petroleum reserves (SPRs) to cushion short-term supply shocks. In addition, India may assess alternative shipping routes and consider infrastructure that bypasses chokepoints to reduce reliance on a single transit corridor.
Other options, such as the Saudi East-West Pipeline and UAE’s Abu Dhabi Crude Oil Pipeline to Fujairah, offer capabilities to move crude around the Hormuz bottleneck. However, these alternatives have limited capacity compared with the vast volumes typically shipped through Hormuz, and their availability would not fully replace a complete disruption. While there is currently no official confirmation of a full closure of the Strait of Hormuz, the spectre of prolonged conflict has prompted heightened vigilance. Government agencies, oil marketing firms and refiners are monitoring developments closely, balancing the use of existing stockpiles with diversified import strategies to protect energy security.
The ongoing geopolitical escalation involving the US, Israel and Iran has placed nearly half of India’s oil imports at risk, highlighting the nation’s vulnerability to disruptions in global crude supply chains. The situation remains fluid, and its implications for crude prices, inflation and broader economic stability will depend on how long tensions persist and how market actors and policymakers respond to potential supply constraints.
