The growing tensions in the Middle East after Israel and United States’ strikes on Iran and the latter’s retaliation has implications for India as well. India imports approximately 90% of its crude oil and the tensions in the Persian Gulf region have put its oil supply at risk.The Strait of Hormuz is a very important maritime passageway in the Middle East that alone is responsible for the transit of 20-25% of global crude oil supply. Hence its importance cannot be overstated. The Strait of Hormuz is a narrow sea passage located at the entrance of the Persian Gulf. The Strait of Hormuz has Iran on the northern side and the UAE and Oman on the southern side. It extends for around 100 miles, and its narrowest stretch is 21 miles wide. It has shallow depth, which means that ships passing through it are vulnerable to naval minesAccording to data from analytics firm Vortexa cited in a Reuters report, the Strait of Hormuz handled average daily flows of over 20 million barrels of crude oil, condensates and refined petroleum products last year. Many OPEC members such as Saudi Arabia, Iran, the United Arab Emirates, Kuwait and Iraq depend heavily on the Strait of Hormuz to supply crude oil to Asian markets.
According to Kpler, a global real-time data and analytics provider, India’s recent pivot back toward Middle Eastern crude has increased its near-term exposure to Hormuz-linked risks.“Escalation would most immediately manifest through higher prices, freight and insurance costs and also at last outright supply shock (as of now probability of supply/production reduction is low), says Sumit Ritolia, Lead Research Analyst, Refining and Modelling, Kpler.Kpler is of the view that while temporary disruptions cannot be ruled out, a prolonged full blockade remains low probability.
India’s exposure to Strait of Hormuz
According to Kpler, India’s exposure to oil procurement via Strait of Hormuz has increased in the last few months.Kpler’s vessel tracking data shows that approximately 2.5–2.7 mbpd of India’s crude imports transit the Strait of Hormuz. This means approximately 50% of India’s crude imports. These are largely sourced from Iraq, Saudi Arabia, the UAE and Kuwait. “Over the past two to three months, India’s dependence on Middle Eastern barrels has increased as refiners have pivoted away from a portion of Russian volumes. As a result, the relative weight of Gulf-origin crude in India’s import basket has risen, increasing short-term sensitivity to any disruption in Hormuz transit,” says Sumit Ritolia.
Can the Strait of Hormuz be closed for long?
Reports suggest that Iran has already begun blocking the Strait of Hormuz. While no official confirmation has been given by Iran on any order to close the Strait of Hormuz, vessels in the area have been reportedly receiving radio messages: no ship is allowed to pass the Strait of Hormuz.A Reuters report suggests that these messages and warnings have been given via VHF radio. US has already asked its commercial ships to avoid Gulf Experts believe that Iran may not be able to fully close the Strait of Hormuz, since it would impact the country’s own exports of crude oil. However, perceived danger in the area may be enough to stop tankers and ships from taking the risk of passing through.
While rhetoric may price in extreme outcomes, Kpler’s base case does not assume a prolonged full closure of the Strait of Hormuz. “Temporary slowdowns, rerouting, or heightened maritime security checks are more plausible scenarios. A sustained blockade would significantly impact regional producers’ own export revenues, creating strong economic disincentives. Therefore, volatility risk is elevated, but structural and prolonged supply loss remains lower probability,” Ritolia told TOI.
Crude Price Hit For India?
Sumit Ritolia told TOI that in the current escalation scenario, the initial impact is likely to be price-driven rather than volume-driven. To begin with, a geopolitical risk premium would lift Brent prices, alongside increases in freight rates and war-risk insurance costs. This would mean that even in the absence of physical shortages, landed crude costs for Indian refiners would move higher. For India, this translates into higher crude oil import bills and potential macroeconomic pressures, while physical availability may remain intact in the near term, says Ritolia.
Russian crude back in focus
India has been steadily reducing its imports of Russian crude in the last few months. Since the Donald Trump administration imposed sanctions on Lukoil and Rosneft – two major Russian oil firms – India’s imports of crude from Russia have dropped. However, if the Strait of Hormuz is closed, Kpler tracking indicates that there is continued availability of Russian cargoes in the Indian Ocean and Arabian Sea region, including volumes in floating storage. “Should Middle Eastern inflows tighten, Indian refiners could pivot back toward Russian grades relatively quickly. The presence of “oil on water” in close proximity to Indian ports provides near-term supply elasticity and commercial flexibility. This optionality serves as an important buffer in the event of temporary Gulf disruptions,” says Sumit Ritolia.
India’s Diversification to the rescue?
What may work as a cushion for India in all the geopolitical uncertainty is its strategy of diversifying sources of crude oil procurement sources. As of now India imports crude from over 40 countries, helping it change the mix of oil imports depending on pricing and availability.Kpler notes that India has diversified its crude sourcing across Russia, US, West Africa and Latin America. However, Kpler’s Sumit Ritolia also points out that barrels from the Atlantic Basin involve substantially longer voyage durations. This could typically be 25–45 days compared to roughly 5–7 days from the Gulf.“While diversification provides supply continuity, it comes with higher freight exposure and longer supply chains. Middle Eastern crude therefore retains a clear logistical advantage and remains structurally important to India’s supply stability,” he says.
India’s Strategic Petroleum Reserves
In a contingency scenario, several inventory layers also provide resilience. In an extreme scenario of geopolitical uncertainty and supply disruptions, India’s strategic petroleum reserves would likely be deployed if required. Refiners also maintain operational crude stocks that can bridge short-term gaps.
“In addition, depots, ports and refining systems hold inventories of key petroleum products – including diesel, gasoline, ATF and LPG – which can be managed strategically during disruptions,” Kpler says.From a domestic pricing standpoint, Kpler does not expect an immediate increase in retail fuel prices by OMCs in the near term. “Although fuel pricing is deregulated, adjustments typically follow sustained crude strength rather than short-lived volatility. The government is expected to closely monitor developments to manage inflationary risks,” Sumit Ritolia says.“The principal near-term vulnerability is therefore price volatility and macro impact, not structural supply insecurity,” he concludes.
