Nearly two years after shipping was disrupted in the Red Sea due to attacks by Houthi rebels , the Strait of Hormuz, a narrow waterway at the mouth of the Persian Gulf, is now in the centre of global supply chain disruption with shipping affected due to the Israel-Iran war.

This is bad news for India, as it is heavily dependent on this Strait for import of oil and fertilisers from the region. More importantly, a number of Indian seafarers currently on board oil tankers owned by global companies are stranded in the Strait, shipping industry sources said.

The Strait of Hormuz handles around 26 per cent of the world’s oil trade. There is a spillover effect on shipping in the narrow waterway critical for all the six oil-rich nations (Gulf Cooperation Council) Saudi Arabia, UAE, Kuwait, Qatar, Oman and Bahrain. The ports of Jebel Ali, Fujairah, Sohar and Ras Laffan are located in this waterway that handles more than 17 million barrels per day, according to data available in the public domain.

“Oil prices will spike. There will be a surge in freight rates, insurance cost will increase, ports of Oman will see a surge in volume, charter hire will be at elevated levels,” said an official of a large shipping line, noting that there will also be security risk.

Currently, there are close to 50 large oil tankers scrambling to leave the Strait of Hormuz. Looks like the oil industry is expecting the Strait to be blockaded in the coming days, Spencer Hakimian, Founder of the US-basd Tolou Capital Management, said in a social media post on Sunday.

West Asia is also a major exporter of fertilizers and its feedstocks (16.3 per cent of the global seaborne total). Major recipients include India, Brazil, and China. Also, the region provides substantial volumes of limestone to India and Bangladesh, as well as cement and clinker to Africa, according to Kpler, a data and analytics platform, providing intelligence tools for trade.

On the impact for Indian seafarers, J Krishnan of S Natesa Iyer Logistics LLP, a leading freight forwarder, said that the disruption in the Strait will have issues like physical safety of crew, assets safety and possible environmental impact of oil spill if any of the vessels takes a hit. The disruption could lead to soaring oil prices that will impact every citizen, he noted. Vessels cannot be abandoned by crew and they need to be navigated to safe havens as early as possible. This is the immediate concern, he added.

“So far there’s been no disruption, and hopefully that would not happen. Insurance rates have risen marginally, however tanker rates have firmed up, the situation remains fluid though,” said CV Subba Rao, Managing Director, Sanmar Shipping Ltd.

Another industry source said oil tankers have been asked to cross the Strait of Hormuz during the daytime only.

An industry official said there will not be impact on fertiliser movement from West Asia as most of the shipments will continue to use Suez Canal route as usual. But, whatever marginal import coming from Iran, due to sanctions, will be completely stopped. The delay due to fertiliser shipments coming via Good of Hope will continue to remain.

Sources in cooperative major IFFCO, which has a joint venture urea production facility in Oman, said that Urea from the OMIFCO plant is shipped from Sur Port on the coast of Oman down south of Muscat and it does not come from Strait of Hormuz. Only if ships carrying fertilisers coming from up North of Sur may be impacted from the closure.

Another industry source said that it depends on the ship carrying the fertiliser whether it wants to sail through Strait of Hormuz. He said a vessel getting loaded on Sunday may start off Oman coast in a day or two which will be clear soon depending on the situation.

(With inputs from Prabhudatta Mishra in New Delhi)

Published on June 22, 2025