What Happened
- The escalating West Asia conflict has severely disrupted India's oil and gas import supply chains, with the Strait of Hormuz effectively closed to regular commercial shipping due to Iranian attacks.
- India's LPG imports fell over 45% month-on-month to approximately 1.12 million tonnes in March 2026, triggering widespread domestic shortages given that over 90% of LPG imports originate from West Asian suppliers routed through Hormuz.
- The Indian crude basket price reached $113.57 per barrel as of March 11, 2026, a sharp jump from pre-war levels, putting pressure on India's import bill and current account.
- In response, India has ramped up Russian crude purchases: imports jumped 94% to 2.06 million barrels per day (bpd) in March 2026, up from 1.06 million bpd in February, aided by a temporary US waiver for oil already in transit.
- The government stated that non-Hormuz crude sourcing has risen to approximately 70% of total imports, up from 55% before the conflict began, as India accelerates diversification across 40 supplier countries.
Static Topic Bridges
Strait of Hormuz — India's Critical Energy Chokepoint
The Strait of Hormuz is a narrow waterway between the Persian Gulf and the Gulf of Oman, connecting the world's richest hydrocarbon reserves to global markets. It is approximately 33 km wide at its narrowest point and is considered the world's most important oil chokepoint. Around one-fifth of global LNG trade and about 20% of global crude oil flows through this strait daily.
- India imports nearly 87–90% of its crude oil requirements; historically around 54% of crude and 60% of LNG imports transited the Strait of Hormuz.
- China, India, Japan, and South Korea account for 75% of oil flows and 59% of LNG flows through Hormuz.
- India has a vulnerability score of 4.9 (out of 10) for supply disruption risk — among the highest in Asia.
- A closure of the strait forces re-routing around the Cape of Good Hope, adding 10–15 days and significant fuel costs to each voyage.
Connection to this news: The Hormuz disruption directly explains the severity of India's LPG shortage and the spike in LNG import costs, and is driving India's emergency diversification toward Russian crude and non-Gulf suppliers.
India's Energy Diversification Strategy
Energy diversification refers to India's long-standing policy of reducing overdependence on any single country or route for hydrocarbon imports. India now sources crude from around 40 countries, including Russia, the United States, West Africa, and Latin America, alongside the traditional Gulf suppliers.
- India is the world's third-largest consumer of crude oil and the fourth-largest LNG importer globally.
- Prior to the current crisis, India increased Russian crude imports significantly after 2022 sanctions, making Russia its top single-country crude supplier.
- India's Strategic Petroleum Reserves (SPR) have a storage capacity of 5.33 million metric tonnes (MMT) at three facilities: Vishakhapatnam, Mangaluru, and Padur.
- The Petroleum and Natural Gas Ministry has been tasked with securing alternative LPG and LNG supply contracts from the US, Australia, and West Africa.
Connection to this news: India's rapid pivot to Russian crude and the government's claim of 70% non-Hormuz sourcing demonstrates both the fragility of the existing supply chain and the effectiveness of prior diversification groundwork, though the LPG crisis shows the limits of diversification in specialised commodity streams.
Impact on Current Account and Macroeconomic Stability
India's current account deficit (CAD) is heavily influenced by crude oil prices since petroleum products are the single largest import item. A sustained rise in oil prices above $100/barrel historically pressures the rupee, increases inflation, and widens the fiscal deficit through subsidy obligations on LPG and kerosene.
- Crude oil and petroleum products typically account for 25–30% of India's total import bill.
- Every $10 per barrel increase in crude oil price is estimated to widen India's CAD by approximately $15 billion annually.
- India's fuel subsidy bill, particularly for LPG under the PMUY (Pradhan Mantri Ujjwala Yojana) scheme, rises sharply when international LPG prices surge.
- The rupee tends to depreciate against the dollar during oil price spikes, compounding the import cost burden.
Connection to this news: With the crude basket at $113.57/barrel and LPG imports down 45%, India faces a classic oil-shock scenario: higher import costs, potential subsidy expansion, and downward pressure on the rupee — all feeding into broader macroeconomic stress.
Key Facts & Data
- India imports ~87–90% of its crude oil requirements.
- Strait of Hormuz historically carried 54% of India's crude and 60% of LNG imports.
- Indian crude basket price: $113.57/barrel (March 11, 2026).
- LPG imports fell 45% month-on-month to ~1.12 million tonnes in March 2026.
- Russia crude imports: 2.06 million bpd in March 2026, up from 1.06 million bpd in February (94% jump).
- India now sources crude from ~40 countries; non-Hormuz sourcing raised to ~70%.
- India's SPR capacity: 5.33 MMT at Vishakhapatnam, Mangaluru, and Padur.
- Every $10/barrel crude price increase widens India's CAD by ~$15 billion annually.