US-Israel-Iran war may force India to again purchase Russian oil:Officials cite probability of prolonged Strait of Hormuz route closure as main reason

Recent events in the Middle East, including military strikes and reports of the closure of the Strait of Hormuz, have raised concerns about the stability of global oil supplies. The Strait of Hormuz is a crucial waterway through which a significant portion of the world’s oil and gas passes. So, what does this mean for India, which relies heavily on imports to meet its energy needs? What’s Happening? According to reports, Iran has closed the Strait of Hormuz in response to military actions by the US and Israel. This has sparked fears of a major disruption in oil and gas supplies. The immediate impact is already being felt in the form of rising oil prices. Why the Strait of Hormuz Matters The Strait of Hormuz is one of the world’s most important energy chokepoints. About a fifth of the world’s oil and gas supplies pass through this narrow waterway. Any disruption to this route can have a significant impact on global energy markets. India’s Reliance on Imports India imports a large portion of its crude oil and natural gas needs. Specifically, India imports 88% of its crude oil and about half of its natural gas. A significant amount of these imports pass through the Strait of Hormuz. Crude Oil: Around 50% of India’s crude oil imports, or about 2.5-2.7 million barrels per day, travel through the Strait of Hormuz. These imports mainly come from countries like Iraq, Saudi Arabia, the UAE, and Kuwait. Natural Gas (LNG): About 60% of India’s liquefied natural gas (LNG) imports also pass through the Strait of Hormuz, primarily from Qatar and the UAE. LPG: Almost all of India’s LPG (cooking gas) imports come through the Strait of Hormuz. How Worried Should India Be? While the closure of the Strait of Hormuz is a cause for concern, India has taken steps to mitigate the potential impact. Sufficient Inventories: India has enough crude oil and fuel stocks to meet its requirements for at least 10 days. This provides a buffer against short-term disruptions. Diversified Supply Sources: India can tap into other sources of oil, including increasing purchases from Russia. Strategic Reserves: India has strategic reserves that can meet about a week’s worth of oil requirements. Potential Impact on Oil Prices The immediate impact of the Strait of Hormuz closure is likely to be reflected in higher oil prices. Brent crude, a global benchmark, has already risen significantly this year. If the disruption continues, prices could rise further. Challenges with Natural Gas Supplies The situation with natural gas (LNG) supplies is more challenging. Unlike crude oil, most LNG volumes are locked in long-term contracts, and only limited volumes are available in the spot market. A prolonged closure of the Strait of Hormuz could leave India with limited alternatives and potentially lead to soaring LNG prices. The same applies to LPG. Government Monitoring the Situation The Indian government is closely monitoring the situation and working on alternative solutions to ensure a stable supply of energy. Expert Opinion According to Sumit Ritolia, a lead research analyst at Kpler, a commodity market analytics firm, a prolonged full blockade of the Strait of Hormuz is unlikely. He believes that India’s diversified sourcing, the option to buy from Russia, and its inventory buffers reduce the risk of sustained shortages. However, he warns that the main near-term vulnerability is price volatility and its impact on the economy.