Amid renewed fears that Iran could block the Strait of Hormuz due to its ongoing tensions with Israel and the US, energy markets are bracing for potential supply shocks and price spikes. But despite being the world’s third-largest oil importer, India is not sounding alarm bells just yet.
According to Sugandha Sachdeva, Founder of SSWealth Street, India remains relatively well-insulated from the fallout of any disruption in the critical waterway due to a combination of strategic diversification, favourable global developments, and domestic buffers.
Here’s why India is relatively shielded
1. Ceasefire truce lowers immediate threat
Sachdeva notes that the recent ceasefire, even though fragile, has reduced the likelihood of Iran shutting down the Strait entirely. “Iran may not close Strait of Hormuz now because of the recent ceasefire agreement,” she said, adding that “Trump has also informally allowed Iran to restart its oil exports.” With Iran regaining oil revenue channels after years of sanctions, it has little incentive to jeopardise its own economic recovery. “It’s going to hurt Iran’s own revenues also. So, that would be a double-edged sword,” she added.
2. India’s oil imports are no longer Strait-dependent
India has diversified away from overdependence on Middle Eastern oil routed through the Strait. “This volume is declining gradually,” Sachdeva said.. Imports from Russia alone surged to 20–22 lakh barrels per day in June—its highest in two years. Similarly, US oil imports rose from 280,000 to nearly 4,39,000 barrels per day between May and June. Countries like Iraq, Saudi Arabia, UAE, Nigeria, and Brazil are also part of the import mix.
Even if the Strait is blocked, alternative maritime routes like the Cape of Good Hope remain available—albeit costlier. “Freight cost would increase, yes. But it would all be compensated by the discounts we are getting from Russia,” Sachdeva noted.
3. Strategic Petroleum Reserves offer a safety net
India’s petroleum reserves and a defined contingency strategy provide additional insulation. “Even if the Strait of Hormuz is blocked, we would not be impacted significantly. We already have our strategy in place,” Sachdeva quoted the Petroleum Minister as saying.
On June 22, Petroleum and Natural Gas Minister Hardeep Singh Puri taking to his official handle on X, wrote,”We have been closely monitoring the evolving geopolitical situation in the Middle East since the past two weeks. Under the leadership of PM @narendramodi Ji, we have diversified our supplies in the past few years and a large volume of our supplies do not come through the Strait of Hormuz now.”
“Our Oil Marketing Companies have supplies of several weeks and continue to receive energy supplies from several routes. We will take all necessary steps to ensure stability of supplies of fuel to our citizens,” the post read.
4. Market dynamics are working in India’s favour
The global crude oil market has already factored in Iran’s return to exports. This has pulled oil prices down sharply—from $80 a barrel to as low as $66 recently. Sachdeva remarked, “Once Iran’s exports come back and the Strait is not blocked, the geopolitical risk premium vanishes.”
While she warns of volatility, she sees strong support for crude prices at $63–65 a barrel. However, should the conflict escalate yet again, prices could shoot back to $100.
Sectoral impact on India
Oil Marketing Companies (OMCs):
OMCs may feel a pinch if crude spikes suddenly. “They might not be able to pass on the cost to retail consumers immediately,” Sachdeva cautiond. However, the recent drop in prices has revived buying interest in OMC stocks.
Upstream Companies (ONGC, Oil India)
Falling crude prices aren’t good news for upstream producers. “If prices come crashing, the rate at which they are selling crude would also come down,” she explained.
Inflation and Subsidies
Crude price spikes could drive up inflation and increase the Centre’s subsidy burden. “Government might have to increase its subsidies on LPG,” she said, noting India’s dependence on imported gas from the region.
Future outlook
India’s proactive diversification of its crude import portfolio, readiness to tap strategic reserves, and access to discounted oil from Russia have placed it in a strong position to ride out any short-term turbulence. While short-term volatility in oil prices could affect sectors differently, Sachdeva underlined that “India is unlikely to be significantly impacted by a Strait of Hormuz closure.”
That said, with oil markets on edge, the coming weeks are expected to be marked by price swings, with support at $63–65 and potential upward resistance at $100 depending on how the geopolitical scenario evolves.
