A few missiles fly over Tehran, and suddenly oil prices shoot up. Tanker insurance premiums rise. Petrol pumps get anxious. And India watches nervously from 2,000 km away.
At the heart of this geopolitical anxiety sits a narrow, contested waterway: the Strait of Hormuz. With Iran threatening retaliation after Israeli airstrikes, one question is keeping the world up at night: could this oil chokepoint be blocked? And if yes, what happens to us?
This time, the escalation is real. After the United States launched direct airstrikes on Iran’s underground nuclear facilities: Fordow, Natanz, and Esfahan, Iran has formally threatened to close the Strait. While no official confirmation exists, military vessels are on alert, and commercial shipping is slowing down. Reports also suggest Iran may have mined key sections of the Strait. The narrow waterway that carries one-fifth of the world’s oil is now the epicentre of a growing geopolitical storm.
Why does this stretch of sea matter so much?
The Strait of Hormuz is just 21 miles wide at its narrowest point, with shipping lanes in either direction barely 2 miles wide. It connects the Persian Gulf to the Arabian Sea, bordered by Iran to the north and the UAE and Oman to the south.
This narrow corridor moves nearly 20 million barrels of oil every day. Countries like Saudi Arabia, Iraq, Kuwait, the UAE, Iran, and Qatar depend on it. So does much of Asia, which receives over 80% of these shipments.
For India, which imports over 85% of its crude oil, any disruption here hits directly at the core of its energy security.
Strait closure now on the table
Until recently, most experts believed Iran wouldn't risk actually closing the Strait. But that assumption collapsed after Tehran’s formal threat on June 22.
In response to US airstrikes on its key nuclear sites, Iran’s Parliament approved a motion to shut down the Strait. The final decision lies with the country’s Supreme National Security Council but with both military and legislative backing, the global oil economy is preparing for the worst.
What exactly can Iran do?
Iran cannot legally block the Strait; international maritime law guarantees freedom of navigation. But it doesn’t need to make it official to trigger panic.
Patrol boats, drone flyovers, missile threats, and underwater mines can delay or discourage tanker movement. This has already played out in the Red Sea, where Houthi attacks slashed commercial traffic by over 70%. A similar disruption in Hormuz would have even deeper consequences, since there’s no alternative sea route for most Gulf exports.
Tankers are already rerouting. Ballast traffic in the Middle East Gulf is dropping. Marine analytics firm Kpler reports a notable fall in vessels heading toward the Gulf of Oman. Fewer ships mean tighter supply and rising prices.
Oil prices react, markets rattle
Brent crude has already crossed $90 per barrel. Citigroup and Goldman Sachs now project scenarios where prices hit $120–$150 if a prolonged disruption occurs.
This is the first time since the 1979 Islamic Revolution that the US has directly targeted Iranian territory. President Donald Trump called the strike “a spectacular military success” and claimed Iran’s enrichment capability had been “completely obliterated.”
Iran has warned of “everlasting consequences.” War-risk premiums are rising, insurers are watching vessel movements closely, and global naval forces including the US Fifth Fleet are on high alert.
What does this mean for India?
The impact would be swift and multidimensional.
Every extra dollar on crude inflates India’s current account deficit, pressures the rupee, and pushes up inflation. Economists estimate that a $10 rise in oil prices could increase CPI inflation by 0.3% and widen the current account deficit by 0.55% of GDP.
This could translate into higher fuel prices, tighter household budgets, a potential RBI rate rethink, and input cost pressure for sectors like aviation, paints, and tyres. Meanwhile, energy exporters and oil marketing companies like ONGC, IOCL, and HPCL could see volatile profits depending on subsidy moves and pricing caps.
Shipping majors like DHT Holdings and Frontline are bracing for the fallout. Some are already avoiding the Hormuz route. While insurance markets haven’t raised red flags yet, jitters are growing.
India is also walking a diplomatic tightrope. On one hand, it has long-standing energy and strategic ties with Iran; like the Chabahar port. On the other, Israel remains a key defence partner. India has so far stuck to a neutral tone, urging de-escalation. But the stakes are rising: the Indian government recently advised its citizens to leave Tehran.
India is quietly diversifying its oil supply
One relief: India has been steadily reducing its dependence on Middle Eastern oil. In June 2025, Indian refiners imported 2.2 million bpd of Russian crude, surpassing combined volumes from Iraq, Saudi Arabia, Kuwait, and the UAE.
Imports from the US also jumped to 439,000 bpd i.e. up from 280,000 a month prior. These flows bypass Hormuz entirely and are helping cushion the immediate shock.
Gas supplies are less vulnerable too. Qatar, India’s key LNG supplier, delivers cargoes that skip Hormuz. Other suppliers like Australia, Russia, and the US remain open.
A global crisis, not just a regional one
Global shipping could face a chain reaction. If more tankers start rerouting around Africa; as they’re already doing to avoid the Red Sea; freight costs, delivery timelines, and insurance premiums could soar. It could feel like the Suez Canal blockage all over again only bigger.
And markets are already reacting. When geopolitical risks rise, investors flee to safer assets. That means more volatility across equities, currencies, and commodities. A sustained oil rally could easily stall fragile post-pandemic recoveries; especially in emerging markets.
Final pour
The Strait of Hormuz may be 2,000 km away, but what happens there directly shapes India’s economy from the petrol pump to the RBI boardroom.
This isn’t just a regional standoff. It’s a live wire running through the global energy system. And for India, the best course now is to stay agile: diplomatically, economically, and logistically because what happens in Hormuz definitely won’t stay in Hormuz.
FAQs
Why is the Strait of Hormuz important to global oil trade?
The Strait of Hormuz is the world’s most critical oil chokepoint. Nearly 20 million barrels of crude pass through it daily, accounting for one-fifth of global supply. Gulf countries like Saudi Arabia, Iraq, and the UAE depend on it to export oil, and Asia, including India, is the biggest buyer.
What happens if the Strait of Hormuz is closed?
If the Strait is blocked or disrupted, oil supplies could drop sharply, sending global crude prices soaring. Shipping costs, insurance premiums, and inflation could rise. For oil-dependent nations like India, this could lead to higher fuel prices, rupee depreciation, and economic strain.
How will a Strait of Hormuz crisis affect India?
India imports over 85% of its crude oil, much of it via Hormuz. Any disruption means pricier oil, higher inflation, a bigger current account deficit, and pressure on the rupee. Sectors like aviation, paints, and transport will feel the pinch. It also complicates India’s diplomacy with both Iran and Israel.
Is India doing anything to reduce its oil import risk?
Yes. India is increasing oil imports from Russia and the US, both of which bypass Hormuz. In June 2025, Russia overtook Middle Eastern suppliers. India is also securing LNG from countries like Qatar and Australia that use alternate routes, reducing its energy vulnerability.
Why are oil prices rising now?
Oil prices are climbing due to fears of a blockade at the Strait of Hormuz, after Iran’s threats in response to US airstrikes. Brent crude has crossed $90 per barrel, and could spike to $120–$150 if disruptions last longer. Markets are pricing in the supply risk and geopolitical instability.
