What Happened
- Global crude oil prices rose over 3% after Yemen's Houthi forces launched missile and drone strikes against Israel on March 28–29, 2026, marking the Houthis' first direct intervention in the ongoing US-Israel war on Iran.
- Brent crude climbed above USD 116 per barrel following the Houthi attacks, extending a run that had already seen prices surge nearly 50% since the conflict began on February 28, 2026.
- The Houthi strikes raised fears of renewed Red Sea shipping disruptions and threatened the critical Strait of Hormuz chokepoint, through which approximately 20 million barrels of oil per day are transported — about 20% of global petroleum liquids.
- Vessel transits through the Strait of Hormuz have fallen from 200–300 per week to approximately one per week since the conflict began, according to the Finance Ministry's review.
- For India — the world's third-largest oil importer — the price surge amplifies import bill pressures, widens the trade deficit, risks inflation acceleration, and strains the fiscal position given the need to manage retail fuel prices.
Static Topic Bridges
The Strait of Hormuz: World's Most Critical Energy Chokepoint
The Strait of Hormuz is a narrow waterway between Iran and Oman connecting the Persian Gulf to the Gulf of Oman and Arabian Sea. It is the single most important maritime chokepoint for global energy trade, with no viable alternative routing for Persian Gulf oil.
- In 2024, approximately 20 million barrels per day (b/d) of petroleum liquids flowed through the strait, representing about 20% of global petroleum liquids consumption.
- About 20% of global LNG trade also transits the strait, primarily from Qatar.
- The strait's width narrows to as little as 21 nautical miles at its narrowest point, with shipping lanes only 2 miles wide in each direction.
- Major Persian Gulf oil exporters — Saudi Arabia, Iraq, UAE, Kuwait, Qatar, and Iran — use the Strait of Hormuz as their primary or only export route.
- China, India, Japan, and South Korea collectively account for approximately 69% of the oil that flows through the strait.
- Unlike the Suez Canal or Strait of Malacca, there are no geographically proximate alternatives if the Strait of Hormuz is blocked; the only partial workaround is the Saudi East-West pipeline (capacity ~9 million b/d vs. 20 million b/d flow).
Connection to this news: Houthi attacks on Israel and threats to Red Sea shipping directly raise the risk of broader Strait of Hormuz disruption, triggering the oil price spike — since even the threat of closure is enough to drive market panic given the strait's irreplaceable role.
Yemen's Houthi Movement: Background and Strategic Role
The Houthis (formally Ansar Allah) are an armed political movement that controls large parts of northern Yemen including the capital Sanaa. They are aligned with Iran and have previously disrupted Red Sea and Gulf of Aden shipping during the 2023–2025 Gaza conflict period.
- The Houthis first began targeting commercial and military shipping in the Red Sea in late 2023 in solidarity with Gaza, forcing many shipping companies to reroute around the Cape of Good Hope, adding 10–14 days of transit time and significantly raising freight costs.
- Yemen's geographical position — straddling the Bab el-Mandeb strait (Red Sea entry point) and near the Gulf of Aden — gives Houthi forces the ability to threaten a key secondary chokepoint.
- Iran supplies the Houthis with ballistic missiles, drones, and intelligence, enabling long-range strikes well beyond Yemen's borders.
- The group's entry into the US-Israel-Iran war on March 28, 2026 marked an escalation beyond their previous role, with direct strikes on Israeli territory.
- Past Houthi attacks drove a 400%+ spike in container shipping insurance premiums and forced major diversions away from the Suez Canal route in 2023-24.
Connection to this news: The Houthi attacks on Israel — declared in solidarity with Iran — represent a broadening of the West Asia conflict front, directly threatening the Red Sea shipping corridor and raising fears of Hormuz disruption, which is the proximate cause of the oil price surge.
India's Oil Import Dependence and Price Shock Transmission
India imports approximately 85–87% of its crude oil requirement, making it structurally vulnerable to global crude price spikes. A sustained rise in oil prices transmits through India's economy via multiple channels simultaneously.
- Direct fiscal channel: Higher crude prices raise under-recoveries on petrol, diesel, cooking gas (LPG), and kerosene for Oil Marketing Companies (OMCs); the government may need to compensate via subsidies or allow retail price hikes.
- Inflation channel: Fuel is an input across virtually all production and transport activities; rising fuel prices increase core inflation through cost-push effects.
- Trade deficit channel: Every USD 10/barrel rise in crude price widens India's CAD by approximately 36 basis points of GDP, adding to external financing needs.
- Rupee channel: A widening current account deficit combined with global risk-off (capital outflows) depreciates the rupee, which further raises the rupee cost of crude imports, creating a feedback loop.
- Growth channel: Sustained high oil prices constrain household purchasing power and raise business costs, reducing GDP growth by an estimated 20–25 basis points per USD 10/barrel increase.
Connection to this news: The 3%+ oil price spike following Houthi attacks activates all these transmission channels simultaneously, explaining why India's Finance Ministry has flagged this as a high-priority external risk.
Strategic Petroleum Reserves (SPR) and Energy Security Policy
To buffer against supply shocks, India maintains Strategic Petroleum Reserves (SPR) managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle under the Ministry of Petroleum and Natural Gas.
- India's SPR facilities are located at Visakhapatnam (Andhra Pradesh), Mangaluru (Karnataka), and Padur (Karnataka), with a combined storage capacity of approximately 5.33 million metric tonnes (~39.1 million barrels).
- At current consumption rates, the SPR can supply roughly 9–10 days of India's oil import requirement.
- India has participated in coordinated IEA strategic reserve releases; the IEA released 400 million barrels from member country reserves in response to the current West Asia shock.
- The government has announced plans to expand SPR capacity through commercial participation (Phase II), where private companies can store crude in government facilities with defined access rights.
- In addition to physical reserves, India has been diversifying crude supply sources (Russia, USA, Brazil) to reduce Gulf dependency — a strategy that faces stress when Hormuz routing for non-Gulf supply is also affected.
Connection to this news: The Houthi attacks reinforcing supply concerns at Hormuz are precisely the scenario SPRs are designed to buffer; the IEA's emergency release and India's own reserve capacity represent the first lines of defence against a sustained supply disruption.
Key Facts & Data
- Brent crude (post-Houthi attacks): above USD 116/barrel
- Brent crude peak (March 2026): USD 126/barrel
- Price surge since conflict began (Feb 28): nearly 50%
- Pre-conflict crude price: ~USD 70/barrel
- Strait of Hormuz oil flow: ~20 million b/d (~20% of global petroleum liquids)
- Strait of Hormuz LNG flow: ~20% of global LNG trade
- Hormuz vessel transits: dropped from 200–300/week to ~1/week
- India's crude import dependence: ~85–87% of requirements
- IEA strategic reserve release in response to crisis: 400 million barrels
- India's SPR capacity: ~5.33 million metric tonnes (~39.1 million barrels)
- Asia's share of Hormuz oil flows (China, India, Japan, South Korea combined): ~69%