As Strait of Hormuz shuts again, uncertainty grips global trade & energy markets
The Strait of Hormuz has again been closed to shipping amid an escalating US-Iran standoff, with the US military establishing a maritime exclusion zone aroun...
What Happened
- The Strait of Hormuz has again been closed to shipping amid an escalating US-Iran standoff, with the US military establishing a maritime exclusion zone around the strait while Iran asserts sovereign jurisdiction over the waterway.
- Iran's Islamic Revolutionary Guard Corps (IRGC) has launched confirmed attacks on merchant vessels, and the US has imposed a naval blockade targeting ships entering or departing Iranian ports.
- Both India and China — two of the world's largest crude oil importers — are rushing to build strategic stockpiles to cushion the impact of a prolonged disruption.
- Approximately 20 million barrels of oil per day transited through the strait before the crisis — roughly 20% of global oil supply — making this the largest oil supply disruption in history according to the International Energy Agency (IEA).
- India's Strategic Petroleum Reserves (SPRs) are approximately 64% full (as of March 2026), holding 3.37 million metric tonnes out of a total capacity of 5.33 MMT — equivalent to roughly 9.5 days of crude supply from strategic reserves alone.
Static Topic Bridges
Strait of Hormuz — Geography and Strategic Significance
The Strait of Hormuz is a narrow waterway connecting the Persian Gulf (west) with the Gulf of Oman and the Arabian Sea (southeast). It is bordered by Iran to the north and Oman's Musandam Peninsula to the south. At its narrowest point, it is approximately 21 nautical miles (about 39 km) wide, with two-mile-wide shipping lanes in each direction separated by a two-mile buffer zone.
- The strait is the world's most critical oil chokepoint: approximately 20 million barrels per day (about 20% of global petroleum supply) passed through it before the 2026 crisis.
- Unlike the Suez Canal (Egypt-controlled) or the Malacca Strait (flanked by Malaysia, Singapore, Indonesia), Hormuz is bordered on one side by Iran — a state in active conflict.
- Gulf exporters can reroute at most 3.5 million barrels/day through overland pipelines (such as Saudi Arabia's East-West Pipeline and Abu Dhabi's Habshan-Fujairah pipeline), leaving a potential shortfall of ~15 million bpd if the strait remains blocked.
- About 80% of oil transiting the strait is bound for Asian markets (China, India, Japan, South Korea).
Connection to this news: The geographical chokepoint character of Hormuz — with no viable alternative sea route out of the Persian Gulf — means a sustained closure triggers an energy crisis of global magnitude, with Asian importers like India bearing a disproportionate share of the shock.
India's Strategic Petroleum Reserves (SPR) — Framework and Gaps
India's SPR programme is managed by Indian Strategic Petroleum Reserves Limited (ISPRL), a Special Purpose Vehicle under the Ministry of Petroleum and Natural Gas. India maintains underground rock caverns at three locations: Visakhapatnam (1.33 MMT), Mangaluru (1.5 MMT), and Padur (2.5 MMT) — totalling 5.33 MMT capacity.
- At full capacity, India's strategic reserves cover approximately 9.5 days of crude oil consumption. When combined with commercial stocks, total coverage is around 74 days — below the IEA's recommended 90-day minimum.
- As of March 2026, reserves are only 64% full (3.37 MMT), indicating a strategic vulnerability precisely when a major supply shock has materialised.
- India imports approximately 85% of its crude oil requirement; West Asia accounts for roughly 60% of those imports.
- Expansion plans approved in 2021 include two additional SPR facilities at Chandikhol, Odisha (4 MMT) and an expanded Padur (2.5 MMT) on a Public-Private Partnership basis.
- India is not a member of the IEA (which is OECD-exclusive), but cooperates as an Association Country and shares data under the IEA's emergency response system.
Connection to this news: India's rush to build stockpiles reflects both the immediacy of the supply shock and the structural gap in its emergency reserves. The crisis exposes the urgency of the Chandikhol and Padur expansion projects.
Freedom of Navigation — International Law Framework (UNCLOS)
The United Nations Convention on the Law of the Sea (UNCLOS), adopted in 1982 and in force since 1994, establishes the international legal framework governing navigation through straits. Part III of UNCLOS (Articles 34–44) creates a special regime of "transit passage" for straits used for international navigation.
- Article 37 defines the applicability of transit passage: straits connecting one part of the high seas or EEZ with another part of the high seas or EEZ.
- Article 38 establishes the right of transit passage for all ships and aircraft — this right "shall not be impeded" and cannot be suspended by coastal states (unlike innocent passage through territorial seas under Article 17, which can be temporarily suspended for security).
- Article 39 sets out duties of ships during transit: continuous and expeditious passage, no threat or use of force against coastal state sovereignty.
- Critical legal fact: Iran has signed but NOT ratified UNCLOS. Iran applies the older 1958 Geneva Convention on the Territorial Sea and reserves its position on transit passage, arguing it applies only to states that have ratified UNCLOS.
- The US also has not ratified UNCLOS but treats most of its navigational provisions as customary international law.
Connection to this news: The US-Iran jurisdictional dispute over the Strait of Hormuz is fundamentally a legal contest: the US asserts transit passage rights under customary international law codified in UNCLOS; Iran, as a non-ratifying signatory, contests this, claiming jurisdiction over the strait as it falls within its territorial sea.
IEA Emergency Response Mechanism
The International Energy Agency (IEA) was established in 1974 by the OECD as a direct response to the 1973 Arab oil embargo. Its founding treaty requires member states to maintain oil stocks equivalent to at least 90 days of net oil imports, and to coordinate stock releases during supply emergencies.
- IEA membership: 31 countries (all OECD members); India is an Association Country — it cooperates but cannot vote or access mandatory stock release mechanisms.
- The IEA has conducted three collective emergency stock releases: 1991 (Gulf War), 2005 (Hurricane Katrina), and 2022 (Russia-Ukraine war, 60 million barrels released in coordination with the US).
- The 2026 Hormuz crisis — removing ~20 million bpd from global markets — would be the largest supply disruption the IEA has ever faced; the 1973 embargo removed approximately 4.5 million bpd.
Connection to this news: India's exclusion from IEA's binding emergency framework and its below-target SPR fill level compound the vulnerability. The stockpiling rush is India's unilateral hedge in the absence of multilateral emergency access.
Key Facts & Data
- Hormuz throughput before crisis: ~20 million barrels/day (~20% of global petroleum supply)
- Narrowest point of Strait: 21 nautical miles (~39 km); shipping lanes: 2 miles each direction
- India's SPR capacity: 5.33 MMT at 3 locations (Visakhapatnam, Mangaluru, Padur)
- India's SPR fill level (March 2026): ~64% (3.37 MMT)
- India's total oil stock coverage (strategic + commercial): ~74 days; IEA recommends 90 days
- Pipeline rerouting capacity from Gulf states: maximum 3.5 million bpd
- Estimated supply shortfall if strait remains blocked: ~15 million bpd
- China's strategic + commercial oil stock coverage: over 120 days of net imports
- China added approximately 40 million barrels to storage during the crisis period
- IEA established: 1974 (in response to 1973 embargo); headquarters: Paris