Strait Of Hormuz Closure Could Impact Two-Fifth Of India’s Oil Imports
India’s oil and gas imports are expected to be significantly affected.
Iran’s parliament has officially decided to block the Strait of Hormuz, following the United States' engagement of its nuclear targets. This decision will likely have immense consequences for global trade, as the Strait of Hormuz accounts for 27% of the world’s oil trade and 20% of the trade in liquified natural gas.
The Strait lies between Oman and Iran, linking sea passages from Gulf countries – Iraq, Kuwait, Saudi Arabia, Bahrain, Qatar, and the United Arab Emirates – with the Arabian Sea and beyond.
The narrow channel, approximately 33 km wide at the narrowest point, separates Iran (north) from the Arabian Peninsula (south). But shipping lanes in the waterway are even narrower - 3 km wide in each direction, making them vulnerable to attacks and threats of being shut down, which Iran has decided to do now.
Qatar, the world's largest exporter of LNG, sends most of its LNG through the strait. In 2024, Qatar exported 77.2 million metric tonnes of gas – 19% of its total exports.
India’s oil and gas imports too are expected to be significantly affected. According to data available, India imports about 38% of its oil and 52% of its LNG needs through the strait.
However, the dependence on its Strait has been reducing over the last five years. In 2020, crude dependence stood at 56%, while in 2022 liquified natural gas dependence stood at 65%.
Out of India’s 27.5 MMT LNG imports, 14.3 MMT comes from UAE and Qatar. Similarly, out of India’s 5 million barrels per day oil imports, the Strait of Hormuz accounts for 1.9 million barrels.
Earlier today Press Trust of India quoted sources saying that India had upped the import of oil from Russia this month, anticipating such disturbance.
At a recent press briefing, Petroleum and Natural Gas Minister Hardeep Singh Puri said that India had enough reserves available at this point. Any blockage or stoppage of traffic at the Strait of Hormuz could create some anxiety, he said last week.
Currently, India has options to increase its crude oil sourcing further from Russia, Africa, US and Saudi Arabia (via the Red Sea).
India imports 90% of its crude oil needs and buys roughly half of its natural gas from overseas. In the month of June 2025, India imported roughly 5.5 mbpd of crude. Of this 2 mbpd was from Middle East via the Strait of Hormuz. As per experts, the 36% shortfall could be made up by increasing imports from Russia, Africa, US and Saudi Arabia.
As per Dr Fereidun Fesharaki, the Founder and Chairman of FGE, the closure of Strait of Hormuz could push crude prices to $100 per barrel. This sudden rise in crude prices will impact Indian economy due to the high import dependence.
Fuel has a direct weight of 4.4% in CPI, while it has a higher weight of 7.95% in WPI. Generally, a 10% increase in oil prices could lead to a increase in headline CPI/WPI by 40/80 bps. Oil accounts for around 26.5% of total imports and 61% of commodity imports. Generally, a 10% increase in oil prices could widen current account deficit by 30 bps.
Apart from oil and gas, the Strait of Hormuz is also a key passage way for transport of other dry goods.
