US strikes on Iran's three main nuclear facilities have once again raised concerns that Tehran might shut down the Strait of Hormuz- one of the world's most critical chokepoints, through which a fifth of global oil and gas supply flows.
For India, the Strait of Hormuz is important as about 2 million barrels per day (bpd) of crude oil out of its total import of 5.5 million bpd transits through the narrow waterway. Having diversified its sources of imports, New Delhi, however, is unlikely to lose sleep even if the Strait is shut down, as alternative sources - from Russia to the US and Brazil - are readily available to fill any void, industry officials and analysts said.
Russian oil is logistically detached from the Strait of Hormuz, flowing via the Suez Canal, Cape of Good Hope, or the Pacific Ocean. Even US, West African, and Latin American flows - though costlier - are increasingly viable backup options.
On gas, India's principal supplier Qatar does not use the Strait of Hormuz for supplies to India. India's other sources of liquefied natural gas (LNG) in Australia, Russia and the US would be untouched by any closure.
The heightened tensions in the world's largest energy supply basket would however have a near-term impact on prices, with oil prices likely to jump to USD 80 per barrel, analysts said.
India is 90 per cent dependent on imports to meet its crude oil needs and buys roughly half of its natural gas from overseas. While crude oil is turned into fuels like petrol and diesel in refineries, natural gas is used for generating electricity, making fertilisers, and turned into CNG for running automobiles or piped to household kitchens for cooking.
Geography
The Strait of Hormuz connects the Persian Gulf to the Arabian Sea and the Indian Ocean. The narrow channel, approximately 21 miles (33 kilometres) wide at the narrowest point, separates Iran (north) from the Arabian Peninsula (south). But shipping lanes in the waterway are even narrower - two miles wide in each direction, making them vulnerable to attacks and threats of being shut down.
Lifeblood of oil and gas
The Strait of Hormuz is of great strategic and economic importance, especially as oil tankers collecting from various ports on the Persian Gulf must pass through the strait. It serves as the maritime artery through which a fifth of the world's oil and gas flows. In 2024, daily shipments averaged 20.3 million barrels of oil and 290 million cubic meters of LNG, according to data from the US Energy Information Administration (EIA).
The bulk of oil exports from regional powerhouses - Saudi Arabia, Iraq, UAE, Qatar, Iran, and Kuwait - must transit this narrow waterway.
In the past, it was the West - chiefly the US and Europe - that stood most exposed to disruption in Persian Gulf energy flows but today it is China and Asia that would bear the brunt of any closure.
According to the EIA, 82 per cent of the crude oil and condensate exports passing through the Strait of Hormuz in 2022 were destined for Asia, with India, China, Japan, and South Korea accounting for 67 per cent of total flows in 2022 and the first half of 2023.
India imports about 90 per cent of its crude oil, with over 40 per cent of those imports originating from Middle Eastern countries whose exports transit the Strait of Hormuz.
The International Energy Agency (IEA) has stated that any disruption to flows through the Strait would have significant consequences for world oil markets.
Threats of closure
Iran has only made noise so far about closing the Strait, but has never shut it down.
This time around too, some Iranian leaders have reportedly called for disrupting oil transit in retaliation for US involvement in Iran's conflict with Israel.
During the Iran-Iraq war from 1980 to 1988, both nations targeted commercial vessels in the Gulf in what came to be known as the Tanker War - yet the Strait of Hormuz was never fully closed.
In 2011 and 2012, Iranian officials, including then-Vice President Mohammad-Reza Rahimi warned of a potential closure of the waterway if the West slapped further sanctions on its oil exports over its nuclear program.
Iran in 2018 threatened to shut the Strait of Hormuz when tensions spiked following the US withdrawal from the nuclear deal and the reimposition of sanctions.
In 2019, four ships were attacked near the Strait of Hormuz, off the coast of Fujairah in the UAE, amid heightened tensions between Iran and the United States during Donald Trump's first term. Washington blamed Tehran for the attacks, but Iran denied the allegations.
In April 2024, Iranian armed forces seized a container ship near the Strait of Hormuz, amid escalating regional tensions following a deadly Israeli strike on Iran's consulate in Damascus, Syria.
Is closure possible
Many experts consider a prolonged Strait of Hormuz disruption less likely due to the US naval presence. Besides hurting exports of Saudi Arabia, the UAE, Kuwait and Qatar, any Iranian closure of the Strait of Hormuz would affect its exports as well.
While Iranian hardliners have threatened closure, and state media have warned of oil spiking to USD 400 per barrel, analysis by global trade analytics firm Kpler assigns "a very low probability" to a full blockade, citing strong disincentives for Iran.
China, Iran's largest oil customer (which imports 47 per cent of its seaborne crude from the Middle East Gulf), would be directly impacted. The world’s second-largest economy is the number one importer of Iranian oil, reportedly accounting for over three-quarters of its oil exports.
Iran's reliance on Hormuz for oil exports via Kharg Island (handles 96 per cent of its exports) makes self-blockade counterproductive.
Additionally, Tehran has made deliberate efforts over the past two years to rebuild ties with key regional actors, including Saudi Arabia and the UAE, both of which rely heavily on the Strait for exports and have publicly condemned Israel's actions. Sabotaging their flows would risk unravelling those diplomatic gains.
A closure would also provoke international military retaliation. Any Iranian naval build-up would be detectable in advance, likely triggering a preemptive US and allied response, according to Kpler. "At most, isolated sabotage efforts could disrupt flows for 24-48 hours, the estimated time required for US forces to neutralise Iran's conventional naval assets." Any such move would provoke military retaliation and diplomatic fallout with Oman, undermining Iran's own backchannels with the US At most, Iran might attempt short-term sabotage operations that disrupt flows for 24-48 hours, not a prolonged shutdown, Kpler said.
"Despite repeated threats, Iran has never closed the Strait of Hormuz due to the strategic and economic costs," said Hitesh Jain, Strategist, Institutional Equities Research at Yes Securities.
Instead, Tehran uses the threat as a diplomatic lever.
Prices
Global oil prices surged following Israel's wave of attacks on Iranian military leaders, residential buildings, army bases and nuclear sites on June 13. Tehran responded with hundreds of ballistic missiles. The escalation led to a spike in oil prices, reflecting increased geopolitical risk and supply disruption fears.
Benchmark Brent crude oil prices have shot up to USD 77 per barrel, up 10 per cent since the conflict started.
Oil analysts at Goldman Sachs warn that oil prices could exceed USD 90 if the conflict escalates.
Brent crude prices could surge to nearly USD 90 a barrel if the Strait of Hormuz were closed, analysts at Citigroup said.
Rating agency Icra said any escalation in the conflict in the area could significantly impact prices.
Impact on India
India sources about 40 per cent of its supplies from Middle East nations such as Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait. These countries export crude oil to India through the Strait of Hormuz route.
In recent years, Russia has emerged as a key supplier and imports from Moscow are now more than the combined flow from the Middle East.
Indian refiners imported 2-2.2 million bpd of Russian crude oil in June - the highest in the last two years and more than the about 2 million bpd bought from Iraq, Saudi Arabia, the UAE and Kuwait, preliminary trade data from Kpler showed.
Also, imports from the United States have risen 439,000 bpd in June, a big jump from 280,000 bpd purchased in the previous month.
While supplies remain unaffected so far, vessel activity suggests a decline in crude loadings from the Middle East in the coming days.
Shipowners are hesitant to send empty tankers (ballasters) into the Gulf, with the number of such vessels dropping from 69 to just 40, and (Middle-East and Gulf) MEG-bound signals from the Gulf of Oman halving.
This suggests that current MEG supplies are likely to tighten in the near term, potentially triggering future adjustments in India's sourcing strategy, Kpler said adding India's import strategy has evolved significantly over the past two years.
Russian oil (Urals, ESPO, Sokol) is logistically detached from Hormuz, flowing via the Suez Canal, Cape of Good Hope, or the Pacific Ocean.
Indian refiners have built refining and payment flexibility, while optimizing runs for a wider crude slate.
Even US, West African, and Latin American flows - though costlier - are increasingly viable backup options. India's June volumes from Russia and the US confirm this resilience-oriented mix.
Alternative sources
If conflict deepens or there is any short-term disruption in Hormuz - Russian barrels will rise in share, offering both physical availability and pricing relief.
India may pivot harder toward the US, Nigeria, Angola, and Brazil, albeit at higher freight costs.
Oil Minister Hardeep Singh Puri on June 13 stated that India has adequate energy supplies for the coming months and can easily tap into alternate sources in case of any disruption.
India can also release oil from its strategic reserves (covering 9-10 days of imports) to bridge any shortfall.
The government can also consider price subsidies to curb inflation if domestic prices spike, especially for diesel and LPG.
Impact of high prices
Higher oil prices in the near term would erode the margins of state fuel retailers Indian Oil Corporation (IOC), Bharat Petroleum Corporation Ltd (BPCL) and Hindustan Petroleum Corporation Ltd (HPCL) have accumulated by keeping retail prices steady even when international rates had dropped.
Jain of Yes Securities said oil markets appear well-supplied, with OPEC's 4 million barrels per day spare capacity and a pre-conflict global surplus of 0.9 million bpd providing a buffer. The rise of US shale adds further resilience.