Global Tensions in West Asia: Exploring the Economic Impact on India's Oil Imports

India's Energy Security at Risk Amid Geopolitical Crisis

Key Figures:

• $85 per barrel: highest level of global benchmark Brent since July 2024
• 20 million barrels per day: estimated daily petroleum liquids consumption through the Strait of Hormuz in 2024
• 40%: proportion of India's crude imports that typically pass through the Strait of Hormuz
• 88.6%: India's crude oil import dependence in April-January FY26
• 258 million metric tonnes per annum: India's total refining capacity

Overview

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The ongoing geopolitical crisis involving the United States, Israel, and Iran has heightened concerns over India's energy security. The crisis has intensified over the last four days, with global benchmark Brent rising above $85 per barrel, its highest level since July 2024. The Strait of Hormuz, a key sea lane, has been declared "closed" by Iran's Revolutionary Guards, tightening tanker traffic and insurance appetite.

India's Dependence on Energy Imports

India's growing dependence on energy imports poses a significant risk to the country's energy security. Provisional data from the Petroleum Planning & Analysis Cell (PPAC) show that crude oil import dependence was 88.6% in April-January FY26, marginally higher than 88.2% in the same period of FY25. India's total refining capacity is approximately 258 million metric tonnes per annum.

Stocks, Buffers, and Pricing Risk

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India's crude and fuels inventories are reported to be around 20-25 days in the system, with officials claiming higher coverage when strategic reserves and other buffers are counted. A prolonged disruption at the Strait of Hormuz would force refiners to diversify sourcing and reroute cargoes, typically at a cost via higher freight, tighter insurance, and longer voyages. JM Financial estimates that every $1 per barrel increase in crude raises India's annual import bill by approximately $2 billion.

Strategic Crude Reserves

India's strategic crude reserves are managed by Indian Strategic Petroleum Reserves Limited (ISPRL), with storage sites at Visakhapatnam, Mangalore, and Padur (near Udupi). The Ministry of External Affairs has warned that any major disruption in the Gulf has serious consequences for the Indian economy, while officials have said there is no immediate reason for panic buying.