Editorial: Bearing the brunt of Brent crude surge

Escalating West Asia conflict and closure of Strait of Hormuz threaten to sharply raise Brent crude prices, exposing India’s energy vulnerabilities

The escalating war in West Asia, triggered by the US-Israeli strikes on Iran and the latter’s retaliation, is causing economic tremors beyond the region. The impact is bound to expose India’s vulnerabilities, particularly in the energy sector. The most feared scenario — the closure of the Strait of Hormuz — is now a grim reality. The waterway, a 21-mile-wide chokepoint, carries roughly one-fifth of the global oil and LNG supply. Analysts warn that if the disruption continues, global oil prices could rise to $120 to $150 per barrel. This is a cause for major concern for India, as nearly 50-52% of its monthly crude imports — roughly 2.6 million barrels per day — transit through the Strait of Hormuz. A sustained disruption would send India’s import bill spiralling, widen the current account deficit, and put immense pressure on the rupee. As the world’s third-largest oil consumer, India will have to bear the brunt of the consequences of the war on Iran. China, on the other hand, is relatively insulated, having spent the last decade building a strategic reserve far superior to India’s estimated 20–25-day commercial buffer. The most immediate casualty of the conflict is India’s carefully curated energy basket. In 2024 and 2025, New Delhi performed a delicate balancing act, pivoting between discounted Russian Urals crude and Middle Eastern grades. However, under renewed pressure from Washington in early 2026, Indian refiners began shifting back toward Gulf suppliers —specifically Iraq, Saudi Arabia, and the UAE.

Higher crude prices will fuel inflationary pressures worldwide, challenging central banks that are already balancing inflation with growth. Industries reliant on petroleum and its derivatives — from transportation to chemicals and plastics — face rising input costs that could compress margins and slow investment. India imports 80-90% of its crude oil, of which West Asia accounts for more than 40%. A rise of even $10 per barrel could could substantially increase import costs. India’s trade corridors, especially for exports to the Gulf region, face rough weather. Electronics exports and other merchandise reliant on shipping through Hormuz and onward freight networks are at risk of delays, rising costs and lost opportunities. A prolonged and deepening regional conflict would significantly aggravate these economic challenges. Navigating this storm will require agile policy responses, diversification of energy sources and stronger economic buffers to cushion against instability. If the Strait of Hormuz remains a theatre of war for more than 30 days, the Indian government will be forced to choose between a massive fiscal blowout to subsidise fuel and an inflationary spike that could derail its domestic recovery. Meanwhile, the Chabahar Port project — India’s gateway to Central Asia — has effectively stalled. Following the reimposition of US sanctions and President Trump’s threat to impose a 25% tariff on countries doing business with Iran, New Delhi has slashed its allocation to the port to zero, marking a retreat from a decade-long investment.

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