The Iran war has exposed a structural weakness in India’s economic engine—a precarious lack of oil buffers. As Israeli and US strikes on Iran effectively shutter the Strait of Hormuz—the world’s most vital energy artery—New Delhi finds itself racing against a clock that is ticking much faster than those of its neighbors.
While Asia’s largest economies, including China, rely heavily on the Persian Gulf, India’s “just-in-time” approach to energy security has left it exposed.
Iran war impact on India, China
The disparity in regional preparedness is stark. While China has spent years aggressively filling its strategic petroleum reserves, India’s safety net remains thin.
“China has at least six months’ worth of crude supplies in storage,” Ajay Parmar, director of energy and refining at ICIS, told Reuters. “Indian inventories are much lower, making it significantly more vulnerable in this situation.”
Official figures and market realities also appear to be at odds. While Oil Minister Hardeep Singh Puri recently told lawmakers that India’s combined crude and fuel stocks could last 74 days, industry sources suggest a much tighter window of 20 to 25 days of consumption.
In contrast, Japan and South Korea—despite their near-total reliance on Middle Eastern barrels—sit on massive cushions of 254 days and 208 days, respectively.
A Forced Pivot
The timing of the disruption is particularly painful for Prime Minister Narendra Modi’s government. As of January, the Middle East accounted for 55% of India’s crude imports, or roughly 2.74 million barrels per day.
This reliance spiked recently as Indian refiners, wary of cooling relations with Washington, began scaling back purchases of discounted Russian oil. With the Strait of Hormuz now a no-go zone, New Delhi is caught between a geopolitical rock and a hard place. The federal oil ministry noted on X that it would take “all necessary steps” to ensure affordability, but the options are narrowing.
The market is now watching for a potential policy U-turn from Washington. If the US grants a reprieve from the 25% tariffs on Russian imports, India may find a lifeline. Secretary of State Marco Rubio indicated that the Treasury and Energy departments will announce price-mitigation measures on Tuesday, though he did not specify if Russian sanctions relief is on the table.
Global Contagion
The crisis is not contained to Asia. A prolonged blockage of the Strait of Hormuz would force a global scramble for every available “incremental barrel,” according to ICIS.
Europe faces a looming shortage of jet fuel, as the Middle East provides 45% of its waterborne imports. While less dependent on Gulf crude due to its status as the world’s top producer, the US is not immune to the price contagion.
For now, Washington is holding its Strategic Petroleum Reserve steady, with officials stating there are no current plans for a release. For India, which lacks such a massive state-controlled lever, the coming weeks will test whether its economy can survive a prolonged drought of its most essential commodity.
