Structural dependence on Gulf imports creates fiscal pressure for New Delhi as regional hostilities threaten supply lines.

India faces structural energy risks as 50% of its oil and 85% of LPG imports pass through the Strait of Hormuz amid the US-Israel-Iran war.

By: AXL Media

Published: Mar 3, 2026, 10:58 AM EST

Source: The information in this article was sourced from Times of India

Strategic petroleum reserves and commercial inventory buffers

India currently holds approximately eight weeks of crude oil and petroleum product inventory, providing a short-term cushion against physical shortages. This buffer includes 25 days of crude oil inventory and 25 days of refined products like petrol and diesel, stored across strategic petroleum reserve (SPR) facilities in Mangalore, Padur, and Visakhapatnam. Total commercial crude stocks are estimated at 100 million barrels. While these reserves are functional for managing temporary outages, they are significantly smaller than the three-month emergency stockpiles maintained by China.

Diversification of the crude oil procurement basket

In response to global geopolitical shifts, India has pragmatically diversified its supplier base over the last five years. Following the 2022 invasion of Ukraine, Indian refiners shifted a large portion of their purchases to Russia to take advantage of discounted Urals crude. However, as U.S. sanctions on Russian oil have tightened in early 2026, the share of Middle Eastern oil in India’s basket has returned to the 45% to 50% range. To mitigate current risks, refiners are increasingly looking toward the Atlantic Basin, including the United States, Brazil, Mexico, and West Africa, despite the longer voyage times and higher freight costs.

Financial impact of rerouting and rising premiums

The disruption of the Strait of Hormuz carries a heavy fiscal price for New Delhi. If tankers are forced to bypass the Gulf and reroute via the Cape of Good Hope, transit times would extend from seven days to over 25 days. Such a shift significantly increases shipping costs and war-risk insurance premiums. Experts estimate that every $1 increase in the price of crude oil adds nearly $2 billion to India’s annual import bill, assuming a run rate of 5 million to 5.5 million barrels per day. This bloating of the import bill exerts direct pressure on India's macroeconomic stability and trade deficit.