Officials have indicated that India possesses enough crude inventories to sustain its oil needs for at least 10 days, alongside fuel stocks that can cover an additional 5 to 7 days. This sufficient supply level ensures that any short-term disruptions caused by the closure of the critically important Strait of Hormuz are unlikely to affect India’s oil supply. Developments resulting from recent military actions by the United States and Israel against Iran, which include the reported death of Iran’s Supreme Leader, have introduced uncertainty in the region, although there is an expectation that the conflict will be resolved swiftly.

Closure of the Strait of Hormuz

Iranian state media announced on February 28 that the Strait of Hormuz has been closed, responding to missile strikes from the US and Israel. This vital corridor is responsible for a significant portion of the world’s energy supply, with approximately 20% of global oil and gas moving through it. Officials believe that even a brief closure will not severely impact India, given current inventory levels. Should the closure extend longer, India can adapt its import strategy and increase purchases from various sources, including Russia.

Market Reactions and Price Fluctuations

The immediate effects of these developments have manifested in market behavior, with Brent crude prices nearing a seven-month high of approximately USD 73 per barrel. Prices have surged roughly 16% since the beginning of the year, and analysts anticipate increased volatility, predicting potential price increases towards USD 80 per barrel if supply disruptions materialize. India is highly dependent on imports for its crude oil and natural gas supplies, sourcing approximately 88% of its crude and nearly half of its natural gas from various international markets.

Dependence on the Strait of Hormuz

Kpler vessel tracking has highlighted that around 2.5 to 2.7 million barrels per day, which constitutes nearly 50% of India’s crude oil imports, passes through the Strait of Hormuz. These shipments largely originate from countries including Iraq, Saudi Arabia, the UAE, and Kuwait. Furthermore, around 60% of India’s liquefied natural gas imports also traverse this route, primarily from Gulf nations such as Qatar and the UAE, raising concerns about the vulnerability of India’s gas supplies to route disruptions.

Alternative Supply Strategies

Indian refineries reportedly maintain crude inventories sufficient to meet fuel demands for 10 to 15 days, with current fuel levels available for an additional 7 to 10 days. Officials maintain optimism regarding the duration of the closure. The Islamic Revolutionary Guards Corps, which oversees the Strait, has announced restrictions on ship passage but has not yet engaged in any attacks. Officials note that the global oil supply remains robust, and India could explore sourcing from other regions as far as Venezuela and Brazil if circumstances necessitate it.

Long-Term Challenges in LNG and LPG Supplies

If the closure persists, India may encounter challenges in sourcing liquefied natural gas, as most volumes involve long-term contractual obligations, limiting available options in the short-term market. The scenario for liquefied petroleum gas (LPG) mirrors that of LNG, with potential price increases should alternatives be required. The government is actively monitoring the situation and preparing strategies to mitigate any risks, including accessing strategic reserves that can support needs for a week.

Future Implications on Oil Prices

As geopolitical tensions rise, the cost of crude oil has increased more than USD 12 per barrel this year alone. Analysts caution that the principal risk in the short term lies in price volatility rather than acute supply shortages. Although temporary disruptions remain a possibility, the likelihood of a prolonged blockade is considered low, given India’s diversified sourcing and inventory strategies.

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