West Asia war impact on oil market worse than earlier anticipated: What’s the worry for India?

The ongoing West Asia conflict has pushed crude oil prices to levels significantly higher than earlier anticipated, with the Indian crude basket reaching app...

What Happened

The ongoing West Asia conflict has pushed crude oil prices to levels significantly higher than earlier anticipated, with the Indian crude basket reaching approximately USD 113.57 per barrel in March 2026 — up from around USD 70 per barrel before the conflict escalated.
India imports approximately 87–89 percent of its crude oil requirements, making it acutely vulnerable to supply disruptions and price spikes originating in the region.
Nearly 88 percent of India's crude oil imports transit through the Strait of Hormuz, making the waterway a single-point-of-failure in India's energy supply chain.
India's Strategic Petroleum Reserves (SPRs) are currently at approximately 64 percent capacity (3.37 MMT out of 5.33 MMT total), sufficient for approximately 9.5 days of consumption at full capacity — or roughly 6 days at current fill levels.
The government has accelerated import diversification, raising non-Hormuz crude sourcing to approximately 70 percent of imports (up from 55 percent before the conflict), including increased purchases of Russian crude oil.

Static Topic Bridges

India's Crude Oil Import Dependence and Energy Security

Energy security refers to the uninterrupted availability of energy sources at an affordable price. India is the world's third-largest consumer of crude oil and petroleum products. Its domestic crude production is declining (major fields at Bombay High, Krishna-Godavari basin, and Assam are mature), making import dependence structurally high. The IEA defines energy security across four dimensions: availability, accessibility, affordability, and acceptability.

India's crude oil import dependence: approximately 87–89 percent of domestic consumption
India is the world's third-largest oil consumer and second-largest crude oil importer in Asia
Top crude oil suppliers: Iraq, Saudi Arabia, Russia, UAE, USA — top-3 account for over 60% of imports
India imports crude from approximately 40 countries as of 2026 (up from fewer sources pre-conflict)
India became a net petroleum products exporter in recent years — domestic refinery capacity exceeds domestic demand for certain products

Connection to this news: India's near-total import dependence means any supply disruption or price shock in West Asia directly transmits to India's import bill, current account, and ultimately retail fuel prices.

Strait of Hormuz: A Critical Energy Chokepoint

The Strait of Hormuz is a narrow maritime passage between Iran and Oman connecting the Persian Gulf to the Gulf of Oman and the Arabian Sea. It is the world's most important oil transit chokepoint, with no readily scalable alternative route for Persian Gulf producers.

Width at its narrowest: approximately 33 km (21 miles)
Transit volume: approximately 15 million barrels per day (mb/d) of crude oil in 2025 — approximately 34 percent of global crude oil trade
India's exposure: approximately 88 percent of India's crude oil imports pass through the Strait
India is the second-largest destination for Hormuz crude flows (~14.7%), after China (~37.7%)
Asian countries collectively receive approximately 89 percent of Hormuz crude exports
Alternative route: Strait of Malacca (for onward Asian distribution); Abu Dhabi's ADNOC pipeline (Habshan–Fujairah) bypasses Hormuz for about 1.5 mb/d
LPG: approximately 90 percent of India's LPG imports also pass through Hormuz

Connection to this news: Any disruption to Hormuz transit — through mines, naval blockades, or Iranian closure — would immediately constrain 88 percent of India's crude import supply, making this waterway central to India's energy security calculus.

India's Strategic Petroleum Reserves (SPR)

Strategic Petroleum Reserves are emergency oil stockpiles maintained by governments to cushion supply disruptions. India's SPR programme is managed by Indian Strategic Petroleum Reserves Limited (ISPRL), incorporated on June 16, 2004, as a Special Purpose Vehicle under the Ministry of Petroleum and Natural Gas.

Total SPR capacity: 5.33 MMT (million metric tonnes)
Storage locations (Phase I):
Visakhapatnam (Andhra Pradesh): 1.33 MMT
Mangaluru (Karnataka): 1.5 MMT
Padur (Karnataka): 2.5 MMT
Current fill level: approximately 3.37 MMT (~64% of capacity)
Days of consumption covered at full capacity: ~9.5 days; at current fill: approximately ~6 days
IEA requirement for member countries: 90 days of import cover (India is not an IEA member, but is an association country)
Oil Marketing Companies (OMCs) maintain additional commercial storage covering approximately 64.5 days
Phase II expansion: Union Cabinet approved 6.5 MMT additional capacity at Chandikhol (4 MMT, Odisha) and Padur (2.5 MMT) under PPP model — Phase II development in progress

Connection to this news: India's SPR covers only 6–9.5 days of consumption — well below the IEA's 90-day benchmark. The West Asia conflict has exposed this vulnerability, renewing calls to accelerate Phase II and fill existing reserves to capacity.

Current Account Deficit (CAD) and Oil Prices

India's current account deficit is highly sensitive to crude oil prices, since petroleum is India's largest import category by value. A rise of USD 10 per barrel in crude prices adds approximately USD 12–15 billion to India's annual import bill, widening the CAD and putting downward pressure on the rupee. This relationship between oil prices and the rupee is a recurring macroeconomic stress point.

Petroleum, oil and lubricants (POL) typically account for approximately 25–30 percent of India's total import bill
India's CAD was approximately 1–1.5 percent of GDP in FY2025 under moderate oil prices
With oil at USD 113/barrel (March 2026 level), CAD pressure has increased significantly
The government has responded with import-dampening measures including the gold duty hike (to conserve forex), INR invoicing with certain partners, and increased Russian crude purchases at discounted prices

Connection to this news: The oil price spike from the West Asia conflict is the underlying macroeconomic driver behind multiple policy responses being seen in May 2026, including the gold import duty hike and the gold's role in widening the forex drain.

Key Facts & Data

India's crude oil import dependence: approximately 87–89 percent
India's rank in global oil consumption: third-largest
Crude oil through Strait of Hormuz: approximately 15 mb/d — ~34 percent of global crude trade
India's share of Hormuz crude imports: approximately 88 percent of its crude imports transit Hormuz
Indian crude basket price (March 2026): approximately USD 113.57 per barrel
Pre-conflict crude price baseline: approximately USD 70 per barrel
India's SPR total capacity: 5.33 MMT at 3 locations (Visakhapatnam, Mangaluru, Padur)
Current SPR fill: approximately 3.37 MMT (~64%)
Days of cover at full SPR capacity: approximately 9.5 days; at current fill: approximately ~6 days
IEA 90-day stockpile benchmark: India's OMC commercial storage covers approximately 64.5 days
ISPRL incorporated: June 16, 2004
Phase II SPR locations: Chandikhol (Odisha, 4 MMT) + additional Padur (2.5 MMT)