Oil and Trade Risks for India from Iran-Israel-US War: Energy Security Under Threat
Escalating military conflict between Iran, Israel, and the United States has threatened the Strait of Hormuz — the world's most critical maritime energy chokepoint — with significant consequences for India's energy security and trade.
Iran reportedly warned vessels against transiting the Strait of Hormuz, with the Islamic Revolutionary Guard Corps (IRGC) issuing "no passage" advisories to commercial ships via VHF communications.
Nearly 50% of India's monthly crude oil imports transit through the Strait of Hormuz, up from 40% in late 2025, exposing India to a major supply disruption risk.
West Asia is a crucial trade bloc for India, accounting for approximately $178.5 billion in bilateral trade — making it India's largest regional trading partner.
Higher oil prices and disrupted supply chains could widen India's current account deficit, weaken the rupee, and reignite inflationary pressures that the RBI had recently brought under control.
Strait of Hormuz: Strategic Geography and Global Energy Significance
The Strait of Hormuz is a narrow body of water connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. At its narrowest point, it is approximately 39 kilometres wide, with the shipping lanes being even narrower. It is the world's most strategically significant maritime chokepoint for energy trade.
India's 50% Hormuz-dependence for crude imports — involving supply from Iraq, Saudi Arabia, Kuwait, and UAE — means any closure or significant disruption would immediately threaten India's energy security with no quick alternative routes available at scale.
India's Energy Security: Import Dependence and Vulnerability
Energy security refers to a country's ability to ensure adequate, reliable, and affordable supplies of energy to support its economy and maintain social welfare. India is one of the world's most energy-import-dependent large economies, with crude oil import dependence having risen to approximately 87.7% of total consumption in 2023-24. This structural dependence makes India acutely vulnerable to supply disruptions and price shocks in global energy markets.
India's triple vulnerability — high import dependence, Hormuz transit exposure, and large West Asia trade footprint — means the Iran-Israel-US conflict directly threatens India's macroeconomic stability even without direct military involvement.
West Asia in India's Foreign Policy: Trade, Diaspora, and Strategic Ties
West Asia (also called the Middle East) holds unique strategic significance for India across multiple dimensions: energy imports, diaspora remittances, bilateral trade, and geopolitical alignment. India's "Look West" policy and the recent formalisation of the India-Middle East-Europe Economic Corridor (IMEC) reflect the growing strategic weight of the region.
The conflict forces India into a difficult balancing act — it cannot afford to alienate Iran (Chabahar) or the Gulf Arab states (energy, remittances), and must carefully navigate its close defence ties with Israel, all while managing the direct economic impact of the conflict.
- India's crude oil import dependence: ~87.7% of total consumption (2023-24)
- Share of crude imports through Strait of Hormuz: ~50% (January-February 2026)
- Daily global oil transit through Hormuz: ~20 million barrels (2024 EIA data)
- West Asia trade with India: ~$178.5 billion bilateral
- India's Strategic Petroleum Reserves capacity: ~5.33 MMT (~9-10 days import cover)
- India's top oil suppliers: Russia (~36%), Iraq (~20%), Saudi Arabia (~11%)
- GCC Indian diaspora: ~9 million workers; largest remittance source region
- IMEC announced: G20 New Delhi Summit, September 2023
- Strait of Hormuz width: ~39 km at narrowest; shipping lanes narrower
- Impact on CAD: Every $10/barrel crude price rise worsens CAD by ~0.4-0.5% of GDP
- India's West Asia diplomatic framework: Multi-vector policy balancing Iran, Israel, GCC