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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 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 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
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 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 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 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 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 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 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 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 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 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 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 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 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
