The US’ planned naval blockade of the Strait of Hormuz may not hit India’s immediate crude supplies but analysts and industry sources have warned of significant “second-order effects”. Shrinking global supply and rising freight costs could hit local prices.
Over the past month, India has been sourcing its crude away from the Strait of Hormuz, a vital energy chokepoint, with more barrels coming from Russia, the west coast of Saudi Arabia and the Atlantic basin.
“The US naval blockade of the Strait of Hormuz would have limited direct impact on India’s immediate crude flows, given that India’s supplies from the Strait of Hormuz are already disrupted, but the second-order effects could be significant,” Nikhil Dubey, senior research analyst at Kpler, said.
Iranian exports, at around 1.6 to 2.0 million barrels a day and largely shipped via the Kharg Island, continue to flow through Hormuz and are mainly going to China, Kpler’s ship-tracking data shows.
“In a blockade scenario, these volumes will dry up from the market, which will tighten overall supply further and push crude prices higher, directly increasing India’s import bill,” Dubey said.
Escalation to disrupt alternative routes
Beyond prices, the bigger risk is the spill over of the conflict into other key shipping routes, analysts said.
“Any escalation involving Iran can also impact chokepoints such as the Bab el Mandeb Strait, where Iran-aligned groups could potentially disrupt shipping flows. This becomes critical for India as a rising share of its crude imports, particularly from Russia via western routes and from Saudi Arabia’s Red Sea ports like Yanbu, passes through this corridor,” Dubey said.
He was talking about Yemen’s Iran-aligned Houthis disrupting shipping in the Bab el-Mandeb Strait, a vital Red Sea artery. Approximately 12 percent of global energy trade and nearly 10-12 percent of overall trade transits through this 29 km corridor. Analysts have warned that simultaneous disruptions in both straits could block nearly one-quarter of the world’s energy supply.
A Bab el Mandeb Strait disruption would force vessels to reroute via the Cape of Good Hope, leading to longer travel time and higher freight costs, Dubey said.
Spread over 1,200 km, Saudi Aramco’s East-West pipeline transports 5 million barrels a day from Abqaiq to the Yanbu port on the Red Sea, bypassing Hormuz.
Abu Dhabi National Oil Company’s 360-km Habshan-Fujairah oil pipeline can funnel 1.5 mbpd directly to the Gulf of Oman.
Both pipelines are operating at full capacity as the escalating conflict chokes energy exports through Hormuz, analysts said.
US President Donald Trump has said that beginning April 13 American navy will prevent ships from passing through Hormuz.
The US Central Command (CENTCOM) said the blockade would be enforced impartially against vessels of all nations entering or departing Iranian ports and coastal areas.
It, however, clarified that it will not impede vessels transiting Hormuz to and from non-Iranian ports. This means that the transit of stranded Indian-flagged vessels in the Persian Gulf is likely to continue via the strait.
As supplies from West Asia, its traditional top supplier of oil, remain disrupted, India will have to look at countries such as Brazil, Guyana, Algeria and the US for crude, said Prashant Vasisht, senior vice president and co-group head, corporate tatings, Icra. For LNG, India could diversify sourcing from Algeria, Russia, and Australia.
India resumes Iran oil purchases after 7 years
India recently purchased 4 million barrels of Iranian oil, trade sources said.
Kpler data showed that a large crude carrier, Jaya, with 2 million barrels, reached the Paradip port on April 9, the first since 2019, following US sanctions. Another vessel named Felicity is headed towards Sikka port and is expected this week.
While CENTCOM said the blockade would be enforced impartially, it is unlikely to have an impact on India’s purchases of oil from Iran as these barrels were already on the water, analysts say.
The US had given a sanctions waiver only on Iranian oil already loaded on the water, suggesting that Jaya and Felicity were loaded in February or March, Dubey said.
“After the sanction window closes on April 19, no Indian refiner will purchase Iranian oil,” he said.
It is unclear which refiner bought the Iranian barrels. State-run Indian Oil Corp operates facilities that receive crude oil at Paradip, while Reliance Industries and Bharat Petroleum both use Sikka port for deliveries.
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