Strait of Hormuz risk: If the conflict between Iran and Israel converts into a full-blown war, will it affect India? If yes, in which way? This is the question that many of you must be thinking! Although we are thousands of kms away from the conflict zone (approximately 2,700–2,830 km), if the battle stretches long, it will affect the Indian economy!
Among several products which India imports, crude oil (mineral fuels/oils) comes at the top by value, reportedly, exceeding USD $130–160 billion annually. Share-wise, it is around 25-30% of total imports (covering crude oil, coal, and petroleum products to meet domestic demand).
As of the 2024–2025 Fiscal Year, the top five countries from which India imports crude oil include Russia, Iraq, Saudi Arabia, the United Arab Emirates (UAE), and the USA. Interesting, Russia has emerged as the leading supplier (35% of total imports), followed closely by Iraq and Saudi Arabia. Iran is nowhere, right? But here’s the catch – Strait of Hormuz!
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Strait of Hormuz risk
A vital international waterway, 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. However, the shipping lanes fall within the territorial waters of Iran and Oman.
The strait is one of the world’s most important oil routes and around one-fifth of global oil trade passes through it. A large share of India’s oil from Iraq, Saudi Arabia, UAE, Kuwait, and Qatar travels through this only sea passage.
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If fighting continues, it will disrupt shipping on this route. Hence, oil tankers may stop (or reroute), which in turn will give rise to freight and insurance costs, and eventually, fuel will become costlier in India.
Crude oil price
The impact of the war is already visible. During late February, crude oil prices stayed mostly around $70–72 per barrel.
On March 2, crude prices jumped close to $80 per barrel due to escalating Middle East tensions and fears of supply disruption.
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Why India says NO to crude oil from Iran?
Before 2019, Iran used to be one of India’s top 3 oil suppliers; Reportedly, the country used to import roughly 450,000–500,000 barrels per day from Iran at its peak. However, India stopped importing Iranian crude in mid-2019 after the United States re-imposed sanctions on Iran’s oil sector.
Since then, Iran has largely been absent from the crude import basket of India.
Conclusion
The longer the war continues, the more stress it will put on India’s economy. It is time for nations to look towards the greater good, not their personal interests.
About the author: Anurag Sason is an Indian journalist with experience in mainstream journalism. He has worked in newspaper, news agency, TV, news app (short video sharing app) and digital media. He tweets at @AnuragSason
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