Why the Strait of Hormuz matters to India amid Israel-Iran tensions
Tensions between Iran and Israel have been on the rise and one name keeps surfacing in global headlines: the Strait of Hormuz.This narrow stretch of sea might seem far from India, but what happens there can directly impact your fuel bill, your business, and even your stock market investments.The Strait of Hormuz is located between Iran to the north and Oman and the United Arab Emirates (UAE) to the south. It connects the Persian Gulf to the Gulf of Oman, and then to the Arabian Sea.advertisement
At its narrowest point, it is only about 21 miles (34 kilometres) wide. However, the actual navigable channel for ships is just a few kilometres wide in each direction, making it a tightly controlled and high-risk zone.Key ports located near the strait include:Iran's Bandar Abbas – a major naval and commercial portUAE's Fujairah Port – an important oil storage and shipping pointOman's Sohar Port – used for trade and shipping reroutesQatar's Ras Laffan – a key port for liquefied natural gas (LNG) exportsThis waterway is the only sea route for oil and gas exports from most of the Gulf countries, which makes it strategically critical.WHY THE STRAIT OF HORMUZ IS IMPORTANTAlmost one-fifth of the world's oil, more than 17 million barrels per day, passes through the Strait of Hormuz. It is the main shipping route for energy exports from major producers like Saudi Arabia, Iraq, Iran, Kuwait, Qatar, and the UAE.advertisementAccording to the U.S. Energy Information Administration (EIA), approximately 20% of the world's oil supply, around 20.9 million barrels per day, passes through this narrow waterway, with nearly 83% of it destined for Asian markets. Any threat to the free flow of oil and gas through this strait poses a significant risk to global energy security.For India, which imports over 85% of its crude oil, this makes the strait a vital artery. Any disruption, whether by military activity, threats, or shipping delays—can lead to a sharp rise in oil prices, impacting India's economy.HOW THE ISRAEL-IRAN CONFLICT AFFECTS THE STRAITAs Israel and Iran continue to launch missile and drone attacks on each other, there is growing concern that Iran could restrict or block access to the Strait of Hormuz—something it has threatened in the past. Even the fear of this happening can send shockwaves through oil markets and disrupt global trade.Military tension also puts commercial ships at risk. Insurance premiums go up, companies reroute vessels, and shipping delays become more likely."The extent to which global powers can dissuade Iran from blocking this vital passage will determine the scale of impact on oil markets going forward. Even without further escalation, the geopolitical risk premium on oil is likely to persist," said Ankit Patel, Partner at Arunasset Investment Services. advertisement"Rising crude oil prices fuel inflationary pressures, particularly in the Consumer Price Index (CPI), and strain the external balance. A $10 increase in crude prices can widen India's current account deficit by approximately 0.55% of GDP and raise CPI inflation by around 0.3%, given oil's significant weight in the national import basket," he added. If the Strait of Hormuz is disrupted, crude oil prices could rise sharply. This would raise the cost of petrol, diesel, and LPG in India, and also affect inflation. Industries like airlines, transport, paints, cement, and logistics, all of which depend heavily on fuel, would face rising costs.India also imports liquefied natural gas (LNG), and much of it comes through this strait, especially from Qatar, the world's biggest LNG exporter. If supplies are delayed, it could impact gas-based power plants and manufacturing industries in India.Many Indian exporters depend on smooth shipping routes through the Gulf. A delay or rerouting of ships increases freight charges, causes delivery lags, and reduces competitiveness—especially for small exporters. India also exports machinery, textiles, jewellery, and chemicals to Gulf nations. The strait's safety plays a big role in keeping those trade routes stable.advertisementEFFECT ON STOCK MARKETS AND THE RUPEEThe stock market reacts quickly to news from the Gulf. Rising oil prices tend to hurt sectors like airlines, paints, and tyres. On the other hand, energy companies, oil refiners, and defence firms may gain.The rupee also comes under pressure as oil becomes more expensive. A weaker rupee increases import costs and may force the Reserve Bank of India to rethink its monetary policy, especially if inflation rises.If the Strait of Hormuz becomes unsafe, every Indian could feel the impact. Petrol prices may rise, monthly budgets may tighten, and inflation could increase. India on Tuesday issued a fresh advisory urging its nationals and Persons of Indian Origin (PIOs) residing in Tehran to move out of the city, as the Iranian capital came under continued aerial attacks from Israeli drones and missiles.The Indian Embassy in Tehran asked individuals who have the means to leave the city on their own and do so without delay.(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)Must Watch
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West Asia is among the regions witnessing the steepest defence spending largely driven by the Israel-Gaza conflict, according to the 2025 report by the Stockholm International Peace Research Institute (SIPRI). The ongoing Israel-Iran conflict only compounds the situation. At the same time, South Asia has emerged as one of the fastest militarising regions worldwide, exacerbating security concerns across Asia. But what are the major factors behind increased military spending worldwide and, specifically, in the Indo-Pacific region – home to seven of the 10 largest militaries? Global militarisation is accelerating at a pace unseen since the Cold War, with South Asia and the Indo-Pacific emerging as the key theatres of this trend. According to the SIPRI, global defence spending in 2024 surpassed $2.7 trillion, with over one-fifth coming from Asia and Oceania. 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India's defence strategy largely revolves around addressing simultaneous challenges – maintaining stability along the Line of Actual Control with China and mitigating asymmetric security threats from Pakistan, particularly terrorism. With increasing maritime commitments and aspirations to become a regional security provider, India's military focus is now deeply tied to its vision for the Indian Ocean Region (IOR). The Indian Navy has seen steady modernisation, with over $21 billion earmarked for equipment in the 2025–26 budget. Pakistan continues to rely on a blend of conventional and nuclear deterrence. Although its economic situation limits long-term defence investments, its military planning remains responsive, aimed at preserving some degree of strategic balance with India. Islamabad's increasing dependence on Chinese support, including under initiatives such as the China-Pakistan Economic Corridor (CPEC), enhances its military capacity but also deepens geopolitical reliance. 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China's activities in the South China Sea, its port-building spree across the IOR, and its sharpening rhetoric on Taiwan have alarmed regional powers. — India: India's spending rose modestly by SIPRI's estimate (1.6 per cent), but IISS reports a 4.2 per cent increase, possibly due to exchange rate adjustments and accounting categories. Strategically, India is placing increasing emphasis on maritime security, deterrence against China, and technological self-reliance. Defence Minister Rajnath Singh outlined a vision of 'Aatmanirbhar Bharat' in defence production, with a target of 1.75 lakh crore (approx. $21 billion) in domestic military manufacturing in 2025. — Pakistan: Faced with growing fiscal constraints, Pakistan's real defence capacity remains limited. Yet, the proposed 20 per cent hike in 2025–26 aims to send a strong political message after its April 2025 confrontation with India. The addition of military pensions and a significant allocation for equipment purchases reflects its desire to keep pace strategically despite economic headwinds. — Japan and Australia: Japan's defence budget reached $55.3 billion in 2024, registering a 21 per cent increase, as Tokyo moves away from its post-WWII pacifism. Australia too continues to scale up, with its outlay of $33.8 billion, driven by the AUKUS agreement and a perceived need to counterbalance China in the Pacific. These actors amplify the Indo-Pacific's shift from a trade-first paradigm to a security-centric theatre. Military spending in the IOR is not driven by economics alone – it is fed by an uptight mix of strategic distrust, nuclear deterrence, and sovereignty concerns. Nuclear posturing The nuclear arms race is once again intensifying, especially in Asia. 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Pakistan is gradually expanding its nuclear arsenal and placing growing emphasis on tactical nuclear capabilities for potential use in regional conflict. This expansion is closely linked to the deteriorating regional security situation. The 2025 India-Pakistan war and China's assertiveness in the South China Sea have added urgency to nuclear preparedness. Compounding this are the failures of global arms control – such as the uncertain fate of New START – and the lack of regional risk-reduction mechanisms. West Asia is witnessing the consequences of this setback. In the Indian Ocean Region, the presence of nuclear-armed submarines, especially from China and India, increases the risk of miscalculation. Without new confidence-building measures, the regional nuclear competition threatens to destabilise rather than deter. Territorial and maritime disputes China's sweeping claims in the South China Sea and increased naval presence in the Eastern IOR (Gwadar, Djibouti, Maldives) are reshaping strategic calculations. India's response has been to deepen naval outreach, participate in multilateral naval exercises (like Malabar), and build infrastructure in the Andaman-Nicobar command. Deterrence by denial Rather than deterrence by punishment, many states in the region are focusing on deterrence by denial – developing submarine fleets, surveillance networks, and air defence systems to deny adversaries access to key maritime zones. Securitisation of the commons Even areas like seabed mapping, undersea cables, and marine biodiversity – once under scientific or civilian control – are now being securitised. This blurs the line between peace-time preparations and war-time readiness. The Indo-Pacific is evolving into one of the most militarised regions globally. Although modernisation and deterrence can promote security, the absence of clear military doctrines, effective arms control frameworks, and reliable confidence-building channels increases the risk of accidental escalation. Despite their significant military budgets, India and China lack dedicated hotlines or transparent mechanisms to verify each other's military activities – raising the risk of miscalculation during crises. India and Pakistan continue to observe a fragile ceasefire, but sustained diplomatic engagement and backchannel communications are largely absent. In such a context, every military drill, arms purchase, or border incident becomes a potential flashpoint. There is an urgent need to reinvigorate CBMs – such as greater transparency in defence spending, advance notification of military drills, collaborative disaster-response training, and open dialogues on maritime security. Multilateral institutions like the Indian Ocean Rim Association (IORA) and ASEAN need to be empowered to facilitate such efforts. Long-term strategic stability in South Asia and the Indo-Pacific needs to go beyond deterrence. It demands sustained dialogue, responsible restraint, and a shared understanding that economic progress cannot flourish amid constant military tension. According to recent reports by SIPRI and IISS, defence spending has increased for ten consecutive years globally. Evaluate major reasons behind this trend. What does India's rising defence expenditure reveal about its strategic priorities? How is India's defence strategy balancing its continental challenges with maritime ambitions in the Indian Ocean Region? In what ways does India's approach to balancing power in the Indo-Pacific illustrate its broader strategic goals amid China's assertiveness and increasing US-led alignment in the region? (K.M. Seethi is the Director of Inter University Centre for Social Science Research and Extension (IUCSSRE), Mahatma Gandhi University (MGU), Kerala, and former Senior Professor of International Relations at the same university.) Share your thoughts and ideas on UPSC Special articles with Subscribe to our UPSC newsletter and stay updated with the news cues from the past week. Stay updated with the latest UPSC articles by joining our Telegram channel – IndianExpress UPSC Hub, and follow us on Instagram and X.
