Rising US-Iran Tensions Put India’s Oil Lifeline at Risk — Markets Watch Closely

India is accelerating efforts to secure crude oil supplies as escalating tensions between the United States and Iran raise concerns about potential disruptions in the Strait of Hormuz, a critical shipping route for global energy trade. The renewed geopolitical risks have highlighted India’s vulnerability to supply disruptions as a significant portion of its crude imports transit through the strategic waterway.

Currently, about 2.6 million barrels per day (bpd) of India’s crude imports pass through the Strait of Hormuz, primarily sourced from Iraq, Saudi Arabia, the UAE and Kuwait, according to data analytics firm Kpler. This represents roughly half of India’s total oil imports, making the country highly dependent on the route for energy security.

The dependence has increased in recent months as India reduced purchases from Russia and returned to traditional Middle Eastern suppliers. Data shows that Hormuz-linked imports have risen from about 2 million bpd last year to 2.6 million bpd in February, highlighting growing exposure to geopolitical risks.

Kpler analyst Sumit Ritolia said:

“A disruption at the Strait of Hormuz would have immediate and significant implications for both India and global oil markets.”

The development is being closely monitored by energy markets and investors as any disruption could quickly push global oil prices higher.

India Accelerates Supply Diversification and Strategic Reserves

To reduce dependence on a single route, India is accelerating efforts to diversify crude oil sources while also expanding strategic petroleum reserves. The government and oil companies are strengthening long-term contracts and exploring alternative transportation routes to ensure uninterrupted supply.

Officials are evaluating bypass routes that avoid the Strait of Hormuz, including:

Saudi Arabia’s East-West pipeline to the Red Sea
UAE’s Abu Dhabi Crude Oil Pipeline to Fujairah
Alternative shipping routes

These pipelines can reduce transit risk but cannot fully replace Hormuz-linked supplies because of limited capacity and producer allocation priorities.

Ritolia noted:

“Access would depend on producer allocation decisions and commercial negotiations.”

India is also expanding its strategic petroleum reserves to protect against supply shocks. The country currently has 5.3 million tonnes of reserve capacity and plans to add two additional facilities with 6.5 million tonnes capacity.

At present, India’s reserves can meet energy demand for about 74 days, although experts suggest the country should aim for 90 days of strategic reserves to ensure stronger energy security.

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India May Turn to Russia and Other Suppliers if Disruption Occurs

If tensions escalate and shipping routes are disrupted, India may increase crude imports from alternative suppliers including Russia, the United States, West Africa and Latin America.

Potential alternative supply sources include:

Russia via eastern shipping routes
United States crude exports
Nigeria and Angola in West Africa
Brazil and Colombia in Latin America

However, sourcing oil from distant regions would increase freight costs and insurance premiums, raising the landed cost of crude oil.

Ritolia explained:

“These alternatives provide supply continuity, but they come with higher freight costs compared to Middle Eastern barrels.”

Recent data shows India imported:

1.15 million bpd from Russia in February
1.11 million bpd from Saudi Arabia
942,000 bpd from Iraq

Total imports reached 5.47 million bpd in February, compared with 5.14 million bpd in January and 4.78 million bpd in February 2025, indicating rising energy demand.

Strait of Hormuz Risks Could Push Oil Prices Higher

Any disruption in the Strait of Hormuz could immediately impact global oil prices because the route handles about 20 percent of the world’s oil supply. Even the threat of disruption can trigger a geopolitical risk premium in crude prices.

Brent crude prices were trading around $71 per barrel on February 26, but analysts warn that prices could rise sharply if tensions escalate.

Ritolia said:

“Any blockade would likely trigger a sharp geopolitical risk premium, driving Brent prices higher even before physical shortages materialise.”

Higher oil prices would lead to:

Increased import costs for India
Higher shipping and insurance costs
Pressure on the rupee
Higher inflation risks

Prashant Vasisht of ICRA said:

“About 20% of the world’s oil consumption passes through the Strait of Hormuz.”

Despite the risks, analysts believe a full blockade remains unlikely because Gulf producers including Iran depend heavily on oil export revenues.

Here’s What Happened Today and Why Traders Reacted

Energy markets and investors reacted cautiously as rising geopolitical tensions increased uncertainty around oil supply routes.

Key Developments

US-Iran tensions increased
Strait of Hormuz risks highlighted
India imports 2.6 million bpd through Hormuz
Diversification plans accelerated
Oil prices remain sensitive

Why Traders Reacted

Risk of higher crude oil prices
Supply disruption concerns
Impact on inflation expectations
Pressure on energy-importing economies

Traders closely monitor geopolitical developments because crude oil prices directly influence market sentiment and sector performance.

What This Means for Markets and Investor Portfolios

The Strait of Hormuz risk is particularly important for investors because oil price movements influence multiple sectors across the economy.

Short-term market impact

Oil and gas stocks may remain volatile
Airline and paint stocks may face pressure
Inflation-sensitive sectors may weaken
Energy stocks may outperform

Long-term investor impact

Higher oil prices could impact corporate earnings
Import-dependent sectors may face cost pressure
Currency volatility may increase
Energy security becomes a key theme

A disruption in the Strait of Hormuz would also affect India’s refined product exports, which currently average about 74,000 bpd through the route, compared with 55,000 bpd last year.

For investors, geopolitical developments in the Middle East are likely to remain a key market driver in the coming months as India works to secure stable oil supplies.