Iran may close Strait of Hormuz: How rising oil prices would hit India
🔥 What’s the current situation?
- Iran’s parliament voted on June 22, 2025 to close the Strait of Hormuz, a waterway critical to 20% of global oil and LNG trade, affecting roughly 80% of that which goes to Asia, including India .
- This closure awaits approval from Iran’s Supreme National Security Council, and Tehran has a history of issuing such threats without acting on them .
📈 Global oil price impact
- Brent crude surged ~6% to around $81/barrel, while WTI rose to approximately $78/barrel amid escalating tensions .
- Analysts warn prices could spike to $100–120 or even $150/barrel if the Strait is blocked for a sustained period .
🇮🇳 Implications for India
- Crude import dynamics
- India sources ~45–50% of its oil via the Strait from Gulf nations (Iraq, Saudi Arabia, UAE, Kuwait); Russia provides ~36% .
- India has increasingly diversified to Russia, the U.S. and Brazil, relying less on the Strait .
- Economic impact
- Every $10/barrel rise could raise India’s oil import bill by $13–14 billion annually, worsen the current account deficit by ~0.3% of GDP .
- If prices rise to $80–90, the CAD could widen to 1.5–1.6% of GDP from a projected 1.2–1.3% .
- Inflation and growth
- A 10% crude spike might nudge WPI inflation up by 80–100 basis points and CPI by 20–30 points .
- Sustained high prices may drag on GDP growth, currently projected around 6.2% .
- Government preparedness
- India has been stockpiling fuel reserves and diversifying sources—through strategic reserves and alternative suppliers (Russia, U.S., West Africa) .
- Crude from Russia/U.S./Aus bypasses the Strait via longer sea routes like Suez or Cape of Good Hope .
- Refinery and company-level effects
- Indian refiners (IOCL, HPCL, BPCL) face higher crude costs but have some hedging ability .
- Upstream companies like ONGC and Oil India could see profits rise from higher domestic crude prices .
- Sectors like paints, which rely on petroleum feedstock, may see cost inflation hurting margins .
✅ In summary
- Short term: Oil prices are jumping, and your petrol/diesel costs may rise in tandem.
- Medium term: India is insulated to an extent—thanks to diversification but still vulnerable to price-driven inflation and trade deficits.
- Government action: Strategic reserves, alternative routes, and diplomatic efforts are ongoing to limit disruption .
These developments are still unfolding. India’s multi-pronged strategy—stockpiles, source diversification, pipelines (like UAE’s Fujairah bypass), and diplomatic engagement—aims to blunt the worst effects. But if the Strait remains closed for weeks, higher inflation and a stressed current account seem likely.
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