When Gulf Oil Is at Risk....How India Could Keep Crude Flowing?
- Gabriela Galeena
- 2 days ago
- 4 min read
Every day, roughly 20 million barrels of crude oil and petroleum products pass through the Strait of Hormuz, nearly one-fifth of global oil consumption. At its narrowest point, the waterway is only about 39 km wide, making it one of the most critical energy chokepoints in the world.
For India, this corridor is not merely a shipping route but an economic lifeline. India is the third-largest oil consumer globally, using about 5.6 million barrels per day (mb/d). Yet domestic production satisfies only a small fraction of this demand.
As a result, India imports around 90% of its crude oil needs, leaving the economy heavily dependent on global supply chains. A substantial portion of these imports originates in the Middle East and travels through the Strait of Hormuz.
Despite this reliance, India has limited influence over the geopolitical forces that determine the security of the corridor. Any disruption, whether from regional conflict, maritime attacks, or political tensions, could quickly affect India’s energy supply and economic stability.
Why the Strait Matters to Global Energy Markets
The Strait of Hormuz is the primary export route for several major oil producers.
Together, these producers export over 14 million barrels of crude oil per day through the
strait.
The biggest buyers of this oil are Asian economies.
Collectively, these economies account for around 69% of the oil transported through the strait, making Hormuz one of the most critical arteries of global energy trade.
India’s Exposure to Oil Price Shocks
India’s vulnerability to Hormuz disruptions is significant. Estimates suggest around 40% of India’s crude imports pass through the strait.
Key Middle Eastern suppliers as per 2024 include:
No. | Suppliers | % of Indian Imports |
|---|---|---|
1. | Iraq | 21% |
2. | Saudi Arabia | 18% |
3. | United Arab Emirates | 9% |
Together, these Gulf suppliers account for close to 47% of India’s crude imports.
The macroeconomic consequences of oil price shocks are substantial.
Analysts from ICRA Limited estimate that a $10 rise in crude prices can increase India’s annual import bill by $13-14 billion.
Economists of DBS Bank stated that higher oil prices can widen the current account deficit by roughly 0.35% of GDP.
HSBC noted that the rupee often weakens when crude prices surge because energy imports increase demand for U.S. dollars.
Energy prices, therefore, have a direct impact on inflation, currency stability, and fiscal balances in the Indian economy.
Russia: The Energy Shock Absorber
India’s oil import structure changed dramatically after the Ukraine conflict in 2022. As Western countries reduced purchases of Russian crude, Russia redirected its exports toward Asian buyers, particularly India.
Before 2022, Russia accounted for less than 2% of India’s crude imports. By 2024-2025, that share had surged to around 37%, making Russia India’s largest supplier.
Russian crude has often been sold at discounts of up to $10 per barrel compared with Brent prices, allowing Indian refiners to lower procurement costs. Beyond cheaper prices, Russian oil has played a broader macroeconomic role. By lowering India’s average import cost, discounted crude helps contain the import bill and ease pressure on the rupee, acting as a macroeconomic stabiliser during periods of global energy volatility.
In addition, Russian shipments typically originate from Baltic, Black Sea, or Far Eastern ports, meaning these supplies bypass the Strait of Hormuz entirely. This geographic diversification reduces India’s dependence on a single energy chokepoint.
The Strategic Constraint from the United States
India’s growing purchases of Russian oil also create geopolitical complexity. The country must balance its energy strategy with its expanding economic and strategic partnership with the United States.
In response to the Ukraine war, the United States and its allies introduced a $60 per barrel price cap on Russian crude and imposed financial and shipping restrictions. These measures affect tanker insurance, shipping logistics, and financial transactions linked to Russian oil. While India has continued importing Russian crude within the price-cap framework, an excessive reliance on Russian energy could create diplomatic friction with Western partners as India deepens cooperation with the United States in trade, technology, and defence.
India’s Energy Balance
India’s energy security today rests on three interconnected pillars:
Middle Eastern oil flowing through the Strait of Hormuz
Discounted Russian crude providing cost advantages and diversification
Stable economic and strategic ties with the United States
Each pillar contributes to India’s economic stability. However, the risk emerges if two of them weaken simultaneously. A major escalation in the Strait of Hormuz could disrupt Gulf supplies and push oil prices higher, while stricter sanctions could complicate imports from Russia.
Such a scenario could expose India to higher energy costs, rupee depreciation, inflationary pressure, and a widening current account deficit.
India’s Energy Future
India’s oil strategy increasingly reflects a multipolar global order. Rather than relying on a single supplier or geopolitical bloc, India sources crude from multiple regions, including the Middle East, Russia, the United States, and other emerging suppliers. This approach mirrors India’s broader foreign policy doctrine of strategic autonomy. By maintaining relationships across competing geopolitical spheres, India seeks to reduce vulnerability to supply disruptions and political pressure.
Energy security today is therefore no longer just about securing oil supplies. It has become a matter of economic diplomacy and geopolitical balancing, where stability in the Gulf, access to discounted Russian crude, and strong ties with the United States must all coexist to support India’s long-term economic resilience.
Disclaimer: This content is for educational purposes only; please conduct personal research and consult a qualified investment advisor before making any investment decisions.
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