A narrow strip of water between Iran and Oman has once again become the centre of global economic anxiety.
The Strait of Hormuz, one of the world’s most critical energy chokepoints, is facing fresh disruption risks as tensions escalate between Iran on one side and the United States and Israel on the other.
The situation has raised alarm across energy markets, governments and investors because of the strait’s outsized role in global oil and gas trade.
For India, the implications could be significant.
WHY THE STRAIT OF HORMUZ MATTERS
Despite being only about 50 km wide at its narrowest point, the Strait of Hormuz handles an enormous share of global energy flows. Roughly 20 million barrels of crude oil per day move through this corridor, along with large volumes of liquefied natural gas.
That accounts for nearly a quarter of global oil trade and about a fifth of global LNG trade, making it one of the most strategically important shipping routes in the world.
Any disruption to traffic through this route can send oil prices soaring, disrupt supply chains and trigger volatility in global financial markets.
According to Sumit Pokharna, Vice President for Fundamental Research at Kotak Securities, the current escalation represents a major supply risk.
“The sharp escalation in tensions between the United States and Israel on one side and Iran on the other, coupled with reported damage to critical regional energy infrastructure, has resulted in one of the most severe supply disruption risks in recent history,” he said.
Iran’s Islamic Revolutionary Guard Corps has warned that vessels attempting to pass through the strait could be targeted, raising fears that shipping traffic could be severely disrupted.
Even a disruption lasting a few weeks could create significant stress in global energy markets.
IS INDIA AT RISK?
India is among the countries most exposed to any disruption in the Strait of Hormuz.
The country imports more than 85% of its crude oil requirements, and a large portion of these shipments originate from the Middle East and pass through the strait.
Estimates suggest that about 50–55% of India’s crude oil and LNG imports transit through the Strait of Hormuz, making the country heavily dependent on the stability of this shipping route.
India’s strategic petroleum reserves currently cover only around eight to nine days of oil demand, and there are no comparable strategic reserves for natural gas.
If the disruption persists beyond the very short term, supply-side stress could intensify quickly.
“We expect gas supplies to be rationed in the near term if disruptions persist,” Pokharna said.
ENERGY COMPANIES COULD FACE PRESSURE
The disruption could have ripple effects across the energy value chain.
Oil marketing companies may still be able to source crude from alternate suppliers, but the cost structure would deteriorate sharply due to higher crude prices, longer shipping routes and rising freight and insurance costs.
Since retail fuel prices in India are effectively regulated, companies may not be able to fully pass on these costs to consumers, which could compress marketing margins.
Kotak Securities maintains a cautious stance on several companies in the sector, including Indian Oil Corporation, Bharat Petroleum Corporation Limited and Hindustan Petroleum Corporation Limited.
Gas transmission and LNG import companies such as GAIL (India) Limited and Petronet LNG Limited could face reduced volumes and higher LNG costs.
Meanwhile, city gas distribution firms including **Indraprastha Gas Limited and Mahanagar Gas Limited may see rising input gas prices and potential supply cuts, which could put pressure on margins.
NOT JUST AN OIL PRICE SHOCK
While global oil markets were previously in an oversupplied position and some countries in the Organisation of the Petroleum Exporting Countries (OPEC) have agreed to increase production, analysts warn that logistical chokepoints pose a different kind of risk.
When transit routes are disrupted, spare production capacity offers little immediate relief.
“This is not merely a price shock—it is a transit shock,” Pokharna said.
Even a temporary disruption in the Strait of Hormuz could alter global trade flows, inflate energy costs and expose structural vulnerabilities in import-dependent economies such as India.
For policymakers, businesses and investors alike, the crisis highlights a critical reality: a narrow waterway thousands of kilometres away can still have the power to shake the global economy.
