Explainer: Why the Strait of Hormuz matters to India's energy security — and what happens if it closes

Time of India

23-06-2025

New Delhi: The
Strait of Hormuz
— a narrow passage between the Persian Gulf and the Gulf of Oman — has again come into focus after the Iranian Parliament approved a possible closure of the strategic waterway following US airstrikes on Iranian nuclear facilities. While the move signals growing geopolitical tensions in West Asia, its ripple effects could be felt thousands of kilometres away — including in India, which depends heavily on crude oil and natural gas imports routed through
Hormuz
.
So, what happens if the
strait
is closed, even temporarily? How vulnerable is India's energy system to such a shock, and what measures can be taken in response? Here's a detailed explainer.
What is the Strait of Hormuz, and why is it critical?
The Strait of Hormuz connects the Persian Gulf with the Arabian Sea and is one of the busiest oil shipping routes in the world. Around 20 million barrels per day (mb/d) of oil and 290 million standard cubic metres per day (mmscmd) of LNG pass through it.
According to
Prashant Vasisht
, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA Ltd., 45–50% of India's crude oil imports and 54% of its LNG imports move through this strait.
'About 20% of the global oil and gas/LNG consumption passes through the Strait of Hormuz. About 45–50% of India's crude oil imports and 54% of natural gas imports pass through the Strait. In case there is a closure of the same, there would be an increase in prices of both crude oil and gas and India would have to look for alternate sources,' he said.
What would be the immediate impact on India's energy security and pricing?
A closure or blockade of the strait would significantly disrupt oil and LNG supply chains, especially for India's refineries and gas utilities dependent on West Asian producers. This includes imports from Qatar, Saudi Arabia, the UAE, and others.
Rohit Chaturvedi
, Partner at Forvis Mazars in India, estimates that more than 30% of India's crude oil imports pass through Hormuz.
'A Hormuz blockade would have very serious short-term effects. A disruption would cause massive increases in freight rates, insurance rates, and re-routing of tankers through the Cape of Good Hope, which would take 10–14 days and involve massive cost overruns,' he said.
Such a disruption could trigger:
1. Immediate increase in energy prices
2. Shipping delays and extended transit times
3. Inflationary pressure across sectors due to higher fuel costs
4. Container shortages and supply chain backlogs beyond the energy sector
How vulnerable is India's energy system to this kind of disruption?
India imports around 89% of its crude oil needs and about 50% of its natural gas requirements. This level of dependency makes it one of the most vulnerable major economies to global oil price swings or supply route disruptions.
According to Vasisht, India's strategic petroleum reserves (SPRs) and commercial inventories combined account for only about 74 days of oil consumption.
'The
SPR
and domestic oil companies have only about 74 days of oil inventory combined. While there are other sources of oil such as Russia, Nigeria, Brazil, US etc., a 20% reduction in global oil and gas supply would impact prices and restrict options,' he added.
Chaturvedi adds that a blockade would also expose gaps in India's energy logistics:
'India's energy supply chain is highly susceptible to geopolitical threats due to its over-reliance on Gulf imports. A blockade would expose weaknesses in crude procurement and also in freight, including tanker shortages and container imbalances.'
What are India's options if the crisis persists?
Experts agree that immediate alternatives are limited and would largely involve sourcing from other geographies. However, long-term strategies will require broader structural changes.
Short-term mitigation:
1. Import from non-Gulf regions: Countries such as Russia, the US, Nigeria, and Brazil are alternative crude suppliers that do not require passage through Hormuz.
2. Use of strategic reserves: SPRs can help temporarily meet shortfalls in case of a sudden supply cut.
3. Rerouting of shipping: Crude and LNG could be re-routed via Cape of Good Hope, although this involves longer transit times and higher freight costs.
Longer-term strategies:
1. Boost domestic exploration and refining
'The options such as boosting domestic production and expanding green energy would take months to years to implement,' said Vasisht.
2. Expand green energy and substitutes
Invest in solar, wind, green hydrogen, and biofuels to reduce long-term fossil fuel dependency.
3. Strengthen logistics and port infrastructure
Chaturvedi suggests firms must prepare for rerouting, longer lead times, and port congestion:
'Strategic freight planning, inventory stocking, and alternative port access become critical for energy as well as non-energy trade flows.'
4. Demand-side management
Encourage energy-efficient transport, adopt fuel rationing if needed, and monitor product pricing to manage inflation.
What is the likelihood of the strait being fully closed?
While Iran's Parliament has approved the measure, the final decision rests with the
Supreme National Security Council
. A complete and prolonged closure remains unlikely given the potential economic consequences for Iran itself—especially its own oil exports and trade ties with countries like China.
Nonetheless, even short-term disruptions of 24–72 hours could push up Brent prices, raise freight rates, and lead to short-term shortages.
Conclusion
The Strait of Hormuz represents a critical vulnerability in India's energy supply chain. A prolonged disruption could test the resilience of India's import infrastructure, pricing strategy, and diplomatic relations. While buffers like SPRs and diversified sourcing offer some protection, longer-term security will depend on structural reforms in exploration, energy diversification, and logistics preparedness.
India's evolving import strategy, combined with a sharper focus on domestic capacity and renewables, may offer a path forward—but for now, the global energy system remains on alert.