Given the increasingly volatile West Asian landscape, rapid deployment of clean technologies is no longer just a climate imperative but a strategic necessity for India, one expert said.
The possible disruption of ship movement through the Strait of Hormuz as a fallout of the recent offensive by the United States and Israel on Iran could have huge repercussions on crude oil supply and prices as well as energy security for the world – and India is no exception. So it is even more crucial now more than ever for India to hasten its transition to clean energy sources, scientists have said.
At the centre of concerns around rising oil prices across the world and how this may impact energy security is the Strait of Hormuz – and what’s happening around it.
The Strait of Hormuz
The Strait of Hormuz is a narrow slice of sea that connects the Persian Gulf in the north and the Arabian Sea below. On one side of the Strait, to its east, is the country of Iran. On its other side, lie the nations of Oman and the United Arab Emirates.
The Strait is narrow: at one point, it is just about 33 kilometres wide.
The Strait is in the news now because of what’s happening around it. On March 1, the US and Israel launched their most recent offensive on Iran this year (June 2025 witnessed attacks on Iran too, which left at least 78 people dead).
Iran’s Supreme Leader Ayatollah Ali Khamenei was killed in an attack; as were schoolgirls in an attack in which Iranian officials said at least 153 people perished. Tehran has retaliated; it launched a fresh offensive on Israel and on US bases in West Asia on Sunday morning. As of the evening of Monday (March 2), reports are still coming in of blasts across several West Asian countries.
Iran could also block the Strait of Hormuz – disrupting all ship movement through it. And this in turn could then affect crude oil supply from West Asia to the rest of the world.
The Strait is a critical passage. Around 20% of the world’s oil and liquified natural gas (LNG) passes through the two mile-wide shipping lanes in the Strait of Hormuz, according to a recent briefing by research firm Zero Carbon Analytics, making it a major chokepoint in global energy supply.
Why the Strait matters for India
Per the Zero Carbon Analytics report, Asian countries will be most affected by this disruption – if it happens. That’s because four Asian countries (China, India, Japan and South Korea) account for 75% of oil and 59% of LNG flows through the Strait.
Per the report, Japan faces the most direct risk of disruption due to its high share of oil and gas trade through the shipping route and its reliance on imported oil and gas. South Korea ranks second and India follows at third; China is at fourth.
One prime reason is the rise in oil prices that a blockade of the Strait of Hormuz could result in. This could push oil prices up to $130 per barrel, matching the all-time high seen during the 2007-2008 oil shock, the report has warned. Iraq’s deputy prime minister said prices could reach as much as $300 per barrel.
According to a recent report by Kpler, a data agency that tracks and monitors shipping vessels worldwide, approximately 2.5-2.7 million barrels per day (Mbd) of India’s crude oil imports transit the Strait of Hormuz. These resources are largely sourced from Iraq, Saudi Arabia, the UAE and Kuwait.
The US’s announcement that India has agreed to stop importing Russian oil means that these crude oil resources transiting the Strait of Hormuz are crucial for India right now.
“Over the past two to three months, India’s dependence on Middle Eastern barrels has increased as refiners have pivoted away from a portion of Russian volumes. As a result, the relative weight of Gulf-origin crude in India’s import basket has risen, increasing short-term sensitivity to any disruption in Hormuz transit,” the Kpler report based on vessel tracking data read.
If the US-Israel war on Iran blocks the passage of vessels carrying these resources, an immediate result would be the rise in crude oil prices in India due to factors including increases in freight rates and war-risk insurance costs, the report noted.
Full blockade unlikely but oil prices could spike
However, a full blockade of the Strait of Hormuz is unlikely, per the Kpler report. “Temporary slowdowns, rerouting or heightened maritime security checks are more plausible scenarios,” it noted. This is because a sustained blockade would drastically affect the export revenues of many West Asian countries, “creating strong economic disincentives”.
Overall, the report assessed that India’s recent pivot back toward West Asian crude has increased its near-term exposure to Hormuz-linked risks.
“Escalation would most immediately manifest through higher prices, freight and insurance costs rather than an outright supply shock (for now),” it said.
Among other factors, India’s diversification of crude oil resources – from Russia, the US, West Africa and Latin America – would reduce the risk of oil shortages, the report said. The main near-term risks are only “price volatility and macro impact, not structural supply insecurity”.
However, India’s diversification also means higher freight exposure (risks to businesses due to fluctuations in shipping costs and other factors). It also means longer supply chains, because barrels from the Atlantic Basin take 25-45 days to arrive, when compared to the average five to seven days from the Gulf. So West Asian crude oil is still important for India and its energy stability, per the report.
India’s vulnerability to rising oil prices
Another report published on March 1 by data analytics company Nomura also listed India as among the top four Asian countries that are among the most vulnerable to rising oil prices, along with Thailand, South Korea and the Philippines.
The report predicted a higher import bill for India. It also expects that risk-aversion driven portfolio outflows will increase balance of payments (a record of all economic transactions between residents of a country and the rest of the world over a specific period) funding pressure in the near term, while higher oil prices will reinforce the RBI’s on-hold stance and can add to fiscal risks.
The report noted that in 2025, Iraq, Saudi Arabia, the UAE and Kuwait (all countries located in the Persian Gulf) cumulatively comprised close to 46% of India’s annual crude oil imports. Moreover, pressure from the US has led to a sharp drop in India’s crude oil shipments from Russia from a 35% share in 2025.
However, a regime change in Iran could lead to a dismantling of its sanctions, and India could benefit from the increase in global supply of crude oil as a consequence over time, the report said.
For India, the impact would be indirect but significant, commented Vivek Y. Kelkar, a researcher and analyst working at the intersection of geo-economics and sustainability.
“With nearly 90% import dependence, every $10 per barrel rise increases the annual import bill by about $13-14 billion, widening the current account deficit, pressuring the rupee and adding to inflation,” he said in a statement.
China would likely bid more aggressively for Russian, Iraqi, Saudi and West African grades, compressing discounts – particularly on Russian crude – and pushing up freight rates as Asian buyers scramble for alternatives, he said.
“If Beijing pivots toward the same Russian or Atlantic Basin supplies that India relies on for diversification, India’s energy security could become more expensive and more contested. The likely outcome is not deep scarcity, but tighter global balances, higher prices and diminished negotiating leverage for Indian refiners.”
The role of clean energy sources for India
In an increasingly volatile West Asian landscape, the wisdom of accelerating our clean energy ambitions becomes even more apparent for India’s energy security, noted Aarti Khosla, director at Climate Trends.
“Reducing dependence on imported conventional energy sources, i.e. oil and gas, through rapid deployment of clean technologies is no longer just a climate imperative but a strategic necessity,” she said in a statement.
“The timing of our recent FTAs [free trade agreements] has also strengthened trade diversification and supply resilience. In this fractured geopolitical order, India must deepen the momentum toward clean energy transition and technological self-reliance to insulate its growth trajectory from external shocks.”
The Zero Carbon Analytics report too recommended this. Oil and gas-importing countries can reduce their vulnerability to major supply shocks by investing in renewable generation and electrifying their economies, it noted, pointing out how Europe has shown how quickly countries can reduce their reliance on fossil fuels – by reducing gas imports by 18% between 2022 and 2024.
The US-Iran war can result in an increase in oil prices in the short term and a negative impact on the global economy in the medium term if the war drags on, said Vaibhav Chaturvedi, senior fellow at the Council on Energy, Environment and Water, in a statement.
“The event will undoubtedly create headwinds for India’s economy,” he added. “India will do well to leverage its relationships to access cheaper oil in this scenario. This is a moment to bring investments to ramp up plans to scale up electrification of the power and transport sector faster as the ultimate solution to energy security.”
(This article has been written by Aathira Perinchery.)
(This article first appeared in The Wire.)
Also Read: What The US-Israel War On Iran Means For Indian Stock Market https://www.vibesofindia.com/what-the-us-israel-war-on-iran-means-for-indian-stock-market/
