By Pallab Bhattacharya
As the Middle East plunges deeper into conflict after U.S. airstrikes on Iranian nuclear facilities, the spectre of a global oil crisis is no longer hypothetical. For India, the world’s third-largest oil importer, the fallout is immediate and multidimensional—threatening not only energy security but also trade, inflation, and regional connectivity.
Strategic Chokepoints Under Threat
The Strait of Hormuz, a narrow waterway off Iran’s southern coast, has become the world’s most-watched geopolitical flashpoint. Roughly 20% of global oil and a third of LNG flows pass through this corridor. For India, the stakes are acute: more than half of its crude oil imports and nearly 70% of its natural gas needs transit this route. Any disruption—whether from Iranian threats or military escalation—would reverberate through Indian refineries, logistics, and ultimately, the consumer’s pocket.
Tehran’s recent hints at closing the strait have rattled energy planners in Delhi. “A variety of options are available to Iran,” said Iranian foreign minister Seyed Abbas Araghchi, following U.S. strikes on Iranian nuclear sites. For India, about 2 million barrels per day of crude—nearly 40% of its total imports—move through the strait, sourced from Iraq, Saudi Arabia, the UAE, and Kuwait.
Energy Security: Diversification and New Risks
India’s response has been both nimble and pragmatic. In June, Indian refiners ramped up Russian oil imports to a two-year high, surpassing combined purchases from the Middle East. Imports from the United States have also surged, reflecting a deliberate strategy to cushion against Middle Eastern volatility. “India’s refining industry now has enhanced capabilities to address supply disruptions swiftly,” notes a recent Kpler analysis.
Yet, this diversification is not without its own challenges. Russian oil, while logistically detached from the Strait of Hormuz, comes with its own set of geopolitical and shipping risks, especially as Western sanctions evolve. Meanwhile, alternative supplies from the US, West Africa, and Latin America are costlier and less reliable in the short term.
Trade and Connectivity: Collateral Damage
The crisis extends beyond energy. India’s trade with West Asia—encompassing Iran, Israel, and the broader Gulf—is under stress. Exporters are already holding back shipments to both Israel and Iran, citing shipping risks and insurance costs. Any escalation could endanger exports to Iraq, Jordan, Lebanon, Syria, and Yemen, with the Global Trade Research Initiative warning of a “cascading effect on India’s trade with West Asian countries”.
India’s flagship regional connectivity project, the Chabahar port in southeastern Iran, is also at risk. “An escalation of tensions in the Middle East endangers Indian interests,” says Harsh V. Pant, president of the Observer Research Foundation. “India’s energy security is intertwined with the stability of the Middle East… Therefore, India does not favour an expansion of this conflict or its persistence in the region”.
Inflation, Shipping, and Policy Response
Oil prices have surged 16% in ten days, with Brent crude nearing $80 per barrel and analysts warning of $100 oil if the conflict persists. Shipping activity in the Gulf is already declining, with the number of empty tankers entering the region halving in recent days. This tightening of supply is expected to drive up costs for Indian refiners, potentially fuelling domestic inflation and impacting growth.
The Global Trade Research Initiative has urged the government to review risk scenarios, diversify crude sourcing further, and ensure strategic petroleum reserves are adequately stocked. “The escalating hostilities and rising regional tensions are posing direct threats to India’s strategic and economic links with West Asia,” said Ajay Srivastava, GTRI founder.
Outlook: Resilience Tested
India’s energy security architecture has evolved since the Ukraine crisis, but the Middle East war is a fresh test. While the country’s diversified sourcing and strategic reserves provide some buffer, the interconnectedness of global oil markets means that no importer is immune from price shocks or supply disruptions.
As the conflict deepens, India must navigate a complex web of energy, trade, and diplomatic challenges—balancing its strategic autonomy with the hard realities of geography and geopolitics. For now, the world’s largest democracy is bracing for turbulence, hoping that contingency planning and diplomatic outreach will keep the worst of the oil crisis at bay.
This is a developing story. Further updates will follow as the situation evolves.