The energy crisis is a ticking time bomb for India's economy, and the current Middle East tensions are a stark reminder of this. But how vulnerable is India's energy security to the region's conflicts?
The Dependency Dilemma:
India, a top global economy, relies heavily on the Middle East for its energy needs, especially oil. Experts estimate that a staggering 50% of India's oil imports come from this region, with a significant portion passing through the Strait of Hormuz. This reliance is a double-edged sword, as the ongoing US-Israel-Iran war has disrupted global energy shipments, particularly with the closure of the Strait.
A Comfortable Position, But at What Cost?
The Indian government assures that the country is well-prepared with sufficient energy reserves. Oil minister Hardeep Singh Puri claims that India can handle the crisis. However, the devil is in the details. India imports a whopping 90% of its crude, with 45-50% from the Middle East. While strategic reserves and commercial inventories provide short-term relief, this high external dependence leaves India vulnerable to Gulf disruptions. And this is where it gets controversial—is India's energy security strategy truly robust?
The US-Israel-Iran War Fallout:
The war has led to a series of attacks and counterattacks, with Iran launching missiles at a US airbase in Bahrain and Israel bombing Beirut. The US has spent $700 million in 24 hours, and the final war cost remains uncertain. These events have further heightened tensions in the Middle East, impacting India's energy imports.
Diversifying the Oil Basket:
In recent years, India has diversified its oil sources, moving away from Middle East dominance. Post-Ukraine invasion, India shifted its focus to Russia for crude oil. Sourav Mitra, an oil and gas expert, notes that this diversification is a pragmatic move. In the last few months, Middle East oil imports have increased to 45-50% as India reduces Russian oil purchases due to US sanctions.
The Strategic Reserves Question:
India currently holds around 8 weeks of crude oil and petroleum products, including strategic reserves. This translates to 25 days of crude oil and 25 days of petrol and diesel inventory. While experts believe India's short-term supply is secure, the country's heavy reliance on imports poses inherent risks.
A Balancing Act:
India's strategy to diversify crude suppliers and maintain strategic reserves has helped mitigate geopolitical risks. These reserves, along with commercial inventories, are designed for temporary supply shocks. However, compared to China, India's reserves are smaller. China has built massive emergency stockpiles, estimated to cover three months of demand, while India's reserves are relatively modest.
The Search for Alternatives:
In a worst-case scenario, if oil supplies through the Strait of Hormuz halt, India has options. India already sources oil from the US, Canada, West Africa, and Latin America due to US pressure against Russian oil. Sourav Mitra suggests that India can further diversify and increase purchases from these regions, even considering more Russian oil if tensions persist. Additionally, India plans to use the Saudi East-West and Abu Dhabi Crude Oil Pipelines to bypass the Strait.
The Cost of Diversification:
If Middle East crude supply were disrupted, the immediate impact would be logistical and price-related. India's significant imports from the Gulf would face challenges. Kpler's Sumit Ritolia explains that while there are short-term buffers, replacing Gulf oil would increase costs and cause logistical delays. Alternative sources like the US, Brazil, and West Africa involve longer voyages and higher freight expenses.
The Rising Crude Bill:
A prolonged disruption to the Strait of Hormuz would significantly impact India's crude import bill. Higher freight costs, war-risk insurance, and geopolitical premiums would drive up prices. Sehul Bhatt from Crisil Intelligence highlights that while the Strait's closure seems unlikely, a prolonged disruption would reroute oil tankers, increasing shipping costs and insurance premiums, ultimately affecting importers' margins.
The LPG and LNG Conundrum:
India's energy security isn't just about crude oil. It's also a major exporter of LPG and LNG. In 2025, nearly 50% of India's LNG and over 85% of LPG imports transited through the Strait of Hormuz. Unlike crude oil, India doesn't maintain large-scale strategic LPG reserves, making it more vulnerable to disruptions. And this is the part most people miss—the potential impact on LPG and LNG supplies could be just as crucial as crude oil.
The Way Forward:
India's energy security strategy is a delicate balance. While the country has diversification options and inventory buffers, sustained disruptions could lead to higher import costs and macroeconomic challenges. The government's task is to navigate these geopolitical tensions, ensuring energy security without compromising on economic stability. And the question remains: Can India truly shield itself from the energy crisis storm brewing in the Middle East?
