The Strait of Hormuz: What will India and the World Lose if the Strait Closes?

The Strait of Hormuz: What will India and the World Lose if the Strait Closes?

KAKALI DAS

As the Israel-Iran conflict escalates, after the US attack on Iran, the threat to global energy security looms large, and for a country like India, heavily reliant on oil imports, the risks are immediate and far-reaching.

One of the gravest concerns lie in the potential disruption of oil supplies through the Strait of Hormuz, a narrow but strategic maritime passageway that has once again come under the shadow of geopolitical confrontation.

India imports around 85% of its crude oil, and nearly 40% of these imports originate from West Asia.

The region plays a vital role in feeding the energy needs of the world’s third-largest oil consumer. The Indian government, aware of the volatility in the region, has taken precautionary measures.

Minister of Petroleum and Natural Gas of India,Hardeep Singh Puri recently reassured the public, stating that India is prepared to handle disruptions.

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“We have diversified our sources of oil supply,” the Minister said, “Out of the 5.5 million barrels of crude oil that India consumes daily, only about 1.5 to 2 million barrels pass through the Strait of Hormuz.”

However, even this partial dependence on the Strait carries substantial risk. The Strait of Hormuz is not just a regional transit route, it’s a lifeline for global energy flows.

What is the Strait of Hormuz?

At its narrowest, the Strait of Hormuz is only 33 kilometres wide, with shipping lanes just about 3 kilometres in each direction. Yet, this slender channel between Iran to the north and Oman and the United Arab Emirates (UAE) to the south handles roughly a fifth of the world’s oil transit – around 17 to 20 million barrels per day.

Major oil-producing nations -Saudi Arabia, Iran, Iraq, Kuwait, the UAE, and the world’s top exporter of liquefied natural gas (LNG), Qatar, all rely on this passage.

The U.S. Energy Information Administration (EIA) categorizes the Strait of Hormuz as the most critical oil chokepoint globally. Even a brief disruption can cause severe supply bottlenecks, hike shipping insurance costs, and send global oil prices skyrocketing.

Iran has previously threatened to close the Strait of Hormuz in retaliation against Western sanctions or military actions. With the current spike in tensions, particularly after recent U.S. and Israeli strikes, Tehran might once again consider this drastic move.

Closing the Strait could remove up to 20 million barrels of oil per day from the market, creating an artificial shortage and driving up prices. Such a move would directly impact the global economy, leading to inflation, energy shortages, and financial instability.

Ironically, this would hurt not just the West but Iran itself, as it uses the same route to export its oil, particularly to China, which buys over 90% of Iran’s oil output.

India no longer purchases crude oil directly from Iran due to U.S. sanctions, but it still relies heavily on Gulf suppliers like Saudi Arabia, Iraq, and the UAE -all of whom export via the Strait of Hormuz. A closure or disruption here would severely impact Indian oil shipments and trigger price spikes for petrol, diesel, and cooking gas.

The Indian government has proactively built buffer stocks. As of now, India has reserves sufficient for 74 days of consumption, offering some insulation against short-term supply shocks.

Moreover, India has been gradually diversifying its sources of oil. In recent months, it has imported more crude from Russia than from West Asia, totalling over 2 million barrels per day.

India has also expanded purchases from the United States and Africa, and continues to maintain strategic partnerships to ensure a broader supplier base. These efforts are vital not only to stabilize domestic fuel prices but also to avoid inflation on essential services such as transport, manufacturing, and aviation.

Any disruption at the Strait of Hormuz would have cascading effects across India’s economy. Fuel price hikes would affect the cost of public and private transportation, air travel, and logistics services.

Gas-based power plants and industrial sectors relying on LNG would also take a hit. Increased freight charges and insurance costs for shipping would make Indian exports less competitive in the global market.

These concerns are not hypothetical. Data from 2022 and early 2023 showed that 82% of crude oil passing through the Strait of Hormuz went to Asian markets. China, India, Japan, and South Korea accounted for 67% of this flow, highlighting Asia’s deep dependence on this vital corridor.

Unlike other maritime chokepoints, such as the Suez Canal or the Panama Canal, the Strait of Hormuz has no viable alternative. While the Red Sea and Bab el-Mandeb Strait have been under similar strain due to Houthi attacks on commercial vessels, they can still be bypassed, albeit at higher costs.

But there is no alternative waterway from the Persian Gulf that can replace the Strait of Hormuz.

Even if Gulf states attempt to export oil through pipelines or overland routes, these alternatives are limited in capacity and would require massive logistical overhauls. The established infrastructure for global oil trade is built around the assumption of an open Strait of Hormuz.

The stakes go beyond India. Even Iran’s allies, such as China, stand to lose from a Strait blockade. Moreover, any attempt by Iran to militarily close or restrict access to the waterway would likely provoke a strong response from the United States, which maintains a significant military presence in the region. This could escalate into a broader conflict with unpredictable consequences.

The psychological impact of such threats is also potent. Even if the Strait isn’t fully closed, the mere fear of attacks on tankers or rerouting of vessels could hike insurance premiums, increase transit times, and unsettle oil markets.

New Delhi has already increased diplomatic engagements with energy-rich nations and is expanding its strategic petroleum reserves. These are important steps, but in a hyper-connected world where a single chokepoint can impact billions, resilience must be constantly tested and strengthened.

The Strait of Hormuz may be geographically distant from Indian shores, but what happens there could hit home worse–at the petrol pump, in household energy bills, in the boardrooms of manufacturing companies, and even in the volatility of the stock market.

For a country like India, the path forward lies in staying ahead of risks, building robust energy partnerships, and preparing for a world where oil may once again become a tool of political pressure.

The Strait may be narrow, but the consequences of its closure would be globally wide-reaching.

25-06-2025

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