India Energy Security at Risk? — The Squirrels

Analyzing how a Hormuz blockade could disrupt India's oil imports, raise prices, and force a policy rethink.

Hormuz: The Chokepoint Threatening India's Oil Lifeline

The Strait of Hormuz is more than just a waterway; it's a critical artery for global energy. In 2025, nearly 15 million barrels of crude oil, roughly 34% of the world's total crude oil trade, flowed through this narrow passage. India, the world's third-largest oil consumer, relies heavily on this chokepoint, importing over two-thirds of its crude oil and almost half of its LNG via Hormuz.

Any disruption to this flow sends shockwaves through India's economy. Consider this: in 2024, China and India together accounted for 44% of the crude exports moving through Hormuz. A closure, even temporary, could trigger a scramble for alternative supplies, driving up prices and squeezing India's import bill. The last time we saw similar tensions was in 2019, when attacks on tankers in the Gulf led to a spike in insurance rates and shipping costs. What happens when those tensions escalate to actual conflict?

Trump's Ultimatum: A Sword of Damocles Over India's Economy

President Trump's recent ultimatum to Iran, threatening military action if the Strait of Hormuz remains closed, injects a dangerous level of uncertainty into an already precarious situation. The threat of strikes on Iranian infrastructure, including power plants and bridges, amplifies the risk of a full-blown regional conflict. Let me repeat that: strikes on Iranian infrastructure. This isn't just about oil prices; it's about regional stability and the potential for a humanitarian crisis.

Moody's has already raised concerns about India's vulnerability, citing its heavy reliance on Gulf oil and limited strategic reserves. India depends on imports for over 88% of its crude oil needs. While the government has been pursuing quiet diplomacy with Iran, the escalating rhetoric from Washington leaves little room for maneuver. This echoes the oil shocks of the 1970s when geopolitical instability sent oil prices soaring, crippling economies worldwide.

Limited Reserves: India's Strategic Vulnerability Exposed

India's strategic petroleum reserves (SPR) offer a limited buffer against supply disruptions. As of March 2026, these reserves could only cover approximately 9.5 days of national demand at full capacity. While state-run oil companies maintain additional storage facilities, the total national storage capacity, including both SPR and commercial stocks, amounts to just 74 days of net imports.

Compare this to other major oil consumers: the United States holds strategic reserves equivalent to several months of imports. The International Energy Agency (IEA) recommends that member countries maintain at least 90 days of import cover. This stark difference highlights India's vulnerability in the face of a prolonged crisis. Ask yourself, is 9.5 days enough to protect a $3.5 trillion economy?

Operation Urja Suraksha: A Naval Escort Through Troubled Waters

In response to the escalating tensions, the Indian Navy has launched “Operation Urja Suraksha,” deploying frontline warships to the Gulf of Oman to escort Indian-flagged cargo ships. This operation underscores the government's commitment to ensuring the safe passage of its vessels. As of late March, over 1.6 million tonnes of crude oil, along with significant quantities of LPG and LNG, were stranded aboard Indian vessels awaiting passage through the Strait.

This naval deployment mirrors similar operations conducted during previous crises in the region. However, the current situation presents unique challenges, given the direct threat of military action and the potential for miscalculation. The risk of escalation remains high, requiring careful coordination and constant vigilance. The Directorate General of Shipping has already issued enhanced security measures for Indian-flagged vessels operating in the region.

The Iran Angle: Balancing Act Between Washington and Tehran

India and Iran share a long history of economic and cultural ties. Despite US sanctions, India has attempted to maintain a delicate balance in its relationship with both Washington and Tehran. India resumed buying oil from Iran in early April, after nearly five years, signaling its desperation to secure stable energy supplies amidst the crisis.

The Indian government has also expressed condolences over the death of Iranian Supreme Leader Ali Khamenei, further highlighting its desire to maintain cordial relations. However, this balancing act is becoming increasingly difficult, given the Trump administration's hardline stance. India finds itself caught between its energy needs and its strategic partnership with the United States. How long can India maintain this balancing act given the current trajectory of events?

Diversification and Renewables: Long-Term Solutions?

The current crisis underscores the urgent need for India to diversify its energy sources and accelerate the transition to renewable energy. While India has made significant strides in expanding its renewable energy capacity, fossil fuels still dominate its energy mix. As of October 2024, renewable energy accounted for 46.3% of India's total installed capacity, with solar and wind energy leading the way.

However, the intermittency of renewable sources and the challenges of grid integration remain significant hurdles. India's net energy import dependency stood at 40.9% in 2021-22, highlighting the long road ahead. A shift towards greater energy independence requires sustained investment in renewable technologies, energy storage solutions, and smart grid infrastructure. Let me repeat that: sustained investment. Otherwise, India remains hostage to global energy markets and geopolitical instability.

Trump's ultimatum on Iran has exposed India's energy vulnerabilities and forced a policy rethink. While diplomacy and naval escorts offer short-term solutions, the long-term answer lies in diversifying energy sources, building strategic reserves, and accelerating the transition to renewables. The question now is whether India can act decisively enough to secure its energy future in an increasingly turbulent world.