The ongoing conflict between Israel and Iran could have serious ramifications for global energy prices, including prices of petroleum products in India and the country’s larger energy security needs. India meets 90 per cent of its crude requirement through imports. Roughly 2.6 million barrels per day (mbpd) of these crude imports transit through the Strait of Hormuz, primarily from Iraq, Saudi Arabia, the UAE and Kuwait.
Any blockade would likely trigger a sharp geopolitical risk premium, driving Brent crude prices higher even before physical shortages materialise, said Sumit Ritolia, lead research analyst at maritime intelligence firm Kpler.
“For India, this would translate into higher import costs, freight and insurance spikes, potential short-term supply tightness, and pressure on the rupee and fiscal balances,” he said, adding that a prolonged full blockade remains a low-probability scenario given the economic dependence of Gulf producers, including Iran, on uninterrupted export revenues.
To secure supplies, India could draw on its strategic petroleum reserves, accelerate spot procurement from non-Hormuz regions and deepen spot or term contracts with alternative suppliers. India’s diversification options include increased sourcing from Russia via eastern routes or through oil at sea around India, the United States, West Africa (including Nigeria and Angola) and Latin America (Brazil, Colombia and Venezuela).
“While these alternatives provide supply continuity, they come with higher freight costs compared to Middle Eastern barrels due to longer voyage distances, which would modestly increase landed crude costs in the short term,” Ritolia said.
The Strait of Hormuz is a chokepoint through which 20 per cent of global petroleum liquids and 20 per cent of liquefied natural gas (LNG) pass, making it critical for a stable oil and gas supply chain. As Iran and West Asian energy producers straddle the Strait of Hormuz, a conflict in the region would impede energy shipping through it.
“Additionally, any attack on oil and gas production facilities of other major Middle East producers would further aggravate the situation. Already, over the past few days, crude oil prices have risen from $65 per barrel to $72–73 per barrel owing to the build-up of geopolitical tensions in the region,” said Prashant Vasisht, senior vice president and co-group head (Corporate Ratings) at ICRA Ltd.
He also emphasised that a prolonged and widening conflict involving several oil and gas producers and the Strait of Hormuz could adversely impact global crude oil and LNG supplies and raise energy prices globally. Around 50 per cent of India’s crude oil and 54 per cent of LNG imports were routed through the Strait of Hormuz in FY25.
“For Indian refiners, while crude oil could be sourced from alternate locations such as the US, Africa and South America, elevated energy prices could lead to a soaring import bill. Additionally, elevated crude oil prices would moderate the marketing margins and profitability of oil marketing companies,” Vasisht said.
However, observing signs of reduced crude flows or lower transit volumes through the Strait of Hormuz, or even in the extreme case of a temporary blockade, the disruption is likely to be short-lived, Ritolia said. “Given the US military presence in the region and the combined maritime capabilities of GCC countries, any major obstruction would probably be addressed within a few days rather than becoming a prolonged event,” he said.
Experts also point out that the Indian government has been actively working on diversifying crude sourcing, but while incremental volumes can be secured from regions such as Latin America or the US, these have longer voyage times and higher freight costs. West Asian cargoes typically arrive in India within five to seven days, making them logistically efficient and strategically important.
“Another important consideration is the availability of Russian crude. A significant number of Russian barrels are currently floating in the Indian Ocean and Arabian Sea region, partly due to reduced Indian imports over the past few months. These floating volumes effectively act as near-term optional supply,” Ritolia said.
