As an effect of the escalation of the Israel-Iran conflict and Tehran’s threat to close the Strait of Hormuz, Indian refiners are likely to ramp up oil purchases from non-West Asian supplies such as Russia, West Africa, the US, and Latin America. Shipping through routes to Indian ports from the above-mentioned suppliers avoids the critical chokepoint in the Persian Gulf, which could be affected by a potential blockage.
The Indian oil sourcing strategy has already started to reflect risk hedging, with Russian oil dominating India’s oil imports.
The US airstrikes on Iranian nuclear facilities in the last few weeks prompted the Iranian Parliament on Sunday to approve a motion calling for the closure of the Strait of Hormuz. The strait is a critical oil transit chokepoint in global energy flows. It is now left to Iran’s National Security Council to decide on the region’s operations. In the past, Iran has threatened to close the strait on multiple occasions, but it never actually happened. Even if the present situation escalates, the closure of the Strait of Hormuz is less likely, as such a move would heighten risks and market concerns globally.
The Strait of Hormuz is a critical and narrow waterway between Iran and Oman and connects the Persian Gulf with the Gulf of Oman and the rest of the Arabian Sea. It is the world‘s most important trade transit checkpoint, with around one-fifth of global liquid petroleum fuel consumption and global liquefied natural gas (LNG) trade transiting through the narrow strait.
