Strait of Hormuz Crisis — What It Means for India's Oil and Gas
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Jack Miller 2026-03-12 Strait of Hormuz crisis, OilCrisis 120
There is a narrow strip of water — just 21 miles wide at its tightest point — that sits between Iran and Oman. Most people could not point to it on a map. But right now, in March 2026, that little waterway is the reason fuel prices are rising, restaurants are shutting, and governments across Asia are running emergency meetings. It is called the Strait of Hormuz, and it is one of the most consequential pieces of ocean in the world.
Here is what you need to understand about what happened, why it matters so much for India specifically, and what comes next.
What Is the Strait of Hormuz and Why Does It Matter?
The Strait of Hormuz connects the Persian Gulf — where most of the Middle East's oil and gas is produced — to the Gulf of Oman and the open sea. Every single day, roughly 20 million barrels of oil pass through this narrow channel. That is approximately 20 percent of the world's entire seaborne oil trade, flowing through a passage you could drive across in under 30 minutes.
On top of that, a significant share of the world's LNG — liquefied natural gas — also moves through Hormuz. Qatar, which runs Ras Laffan, one of the planet's largest LNG export terminals, sends its gas through this route. So does the UAE, Saudi Arabia, Kuwait, and Iraq.
In 2024, 84 percent of all crude oil and condensate that passed through the strait was headed to Asian markets. China, India, Japan, and South Korea together accounted for nearly 70 percent of all Hormuz crude flows. For Asia, the Strait of Hormuz is not just a shipping lane — it is a lifeline.
What Triggered the 2026 Crisis?
On February 28, 2026, coordinated US-Israeli military strikes on Iran — which included the killing of Iran's Supreme Leader Ali Khamenei — triggered a rapid and serious escalation. Iran's Islamic Revolutionary Guard Corps (IRGC) responded by declaring the Strait of Hormuz effectively closed to commercial shipping and warning that any vessel attempting to transit would be targeted.
What followed was swift and severe. Tanker traffic through the strait dropped by approximately 70 percent within days, and then close to zero as major shipping companies including MSC, Maersk, and Hapag-Lloyd suspended transits entirely. Over 150 tankers anchored outside the strait, unwilling to risk passage. Insurance premiums for vessels attempting the route hit six-year highs — making transit economically unviable even for those willing to take the risk.
Several ships were struck. An Indian sailor was killed when the MKD VYOM was hit by a drone boat. Qatar declared force majeure on its gas contracts and halted production at Ras Laffan for several days. Brent crude prices jumped 10 to 13 percent in initial trading, with analysts warning of potential rises to $100 per barrel or higher if disruptions continue.
How Exposed Is India?
Among all the major Asian economies, India faces some of the most acute exposure to a Hormuz disruption — and not just because of oil.
Almost half of India's crude oil imports pass through the Strait of Hormuz. Around 60 percent of India's natural gas imports come from the Middle East, primarily Qatar. And as already covered in our piece on India's LPG crisis, over 80 to 90 percent of India's LPG imports travel through this route.
This triple exposure — crude, gas, and LPG simultaneously — makes India unusually vulnerable compared to most other major economies. Japan imports more oil through Hormuz as a share of total imports, but does not face the same LPG vulnerability. China has more flexibility due to strategic stockpiles and diversified suppliers. India sits in a difficult middle position.
MUFG Research, in its latest India note, warned that the Indian Rupee is particularly exposed, with USD/INR potentially rising above 95 levels if the conflict is sustained and oil prices return to $100 per barrel. A weaker rupee makes all imports more expensive — not just energy, but everything that depends on it, including food and manufactured goods.
What Has India Done in Response?
India has moved fast. The government invoked the Essential Commodities Act to prioritise domestic energy supply, directed refineries to maximise LPG production, and signed an emergency deal to import 2.2 million tonnes of LPG from the US Gulf Coast — a route that bypasses the Middle East entirely, though it adds 25 to 35 days of shipping time.
India has also sharply pivoted toward Russian crude. Indian refiners — including Indian Oil Corporation and Reliance Industries — purchased nearly 30 million barrels of Russian crude in just a few days, after the US issued a 30-day waiver allowing Indian refiners to buy Russian oil already in transit. This move reflects a broader strategic calculus: when the Gulf is disrupted, Russia becomes India's most practical short-term alternative.
The government has also engaged international trading firms — Vitol, Trafigura, and ADNOC Trading — to source alternative cargoes from outside the conflict zone. India's crude oil stocks at the time of the crisis were estimated to cover roughly 25 days of consumption, with strategic petroleum reserves providing an additional buffer.
What Are the Alternatives to Hormuz?
There are some, but none are fully adequate. Saudi Arabia has the East-West Pipeline that can bypass Hormuz by moving crude to the Red Sea port of Yanbu. The UAE has a pipeline connecting Abu Dhabi to Fujairah port on the Gulf of Oman. Together, these can handle an estimated 2.6 million barrels per day — a significant amount, but a fraction of the 20 million barrels that normally flow through Hormuz daily.
Some ships have begun rerouting around the Cape of Good Hope — the southern tip of Africa — adding anywhere from 10 to 15 days of transit time and significantly higher fuel and operational costs. This adds to global shipping inflation, which eventually feeds through to consumer prices everywhere.
What Does This Mean for You Going Forward?
In the short term, expect fuel prices to remain elevated and LPG supplies to stay tight, particularly for commercial users. The government's priority is clearly to protect household cooking gas supply — restaurants and industrial users will continue to feel the squeeze.
In the medium term, analysts at UNCTAD and other global bodies have warned that higher energy and freight costs will feed through to food prices, amplifying cost-of-living pressures. India's significant dependence on Gulf energy makes it more exposed to this inflationary channel than many other large economies.
The longer-term lesson is one India has been slow to learn but can no longer ignore: energy diversification is not optional. An over-reliance on a single volatile region for over 80 percent of LPG, a major share of crude, and the bulk of natural gas imports is a structural vulnerability that no amount of emergency management can fully offset.
This crisis is a wake-up call. The question is whether India will act on it — or wait for the next one.
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