India's Energy Buffer Buys Time Amid Hormuz Crisis—But LPG Delays Signal Cooking Fuel Vulnerability

India's energy supply chain is under immediate stress, but the risk of a severe shortage is being eased by partial relief and existing buffers. The core vulnerability lies in the Strait of Hormuz, a chokepoint that handles a critical volume of the country's essential imports. Roughly half of India's crude oil imports transit this narrow waterway, while the figure is even more pronounced for liquefied petroleum gas (LPG), where 80-85% of imports pass through. This concentration makes the nation highly sensitive to any disruption.

The immediate impact is visible in the stranded fleet. Despite Iran's recent move to allow some passage, 22 Indian ships remain stranded on the western side of the strait, indicating that the blockade is far from fully lifted. This partial disruption has already triggered a crisis for cooking fuel, with India's LPG imports from Gulf countries effectively halted since early March. The situation is being managed, however. Iran's decision to permit some vessels to pass has helped, with two Indian-flagged LPG carriers having sailed through the strait, and a third following soon after. This incremental relief is easing the cooking gas crisis but does not resolve the broader supply chain pressure.

The scale of India's dependence underscores the systemic risk. The country imports more than 85% of its domestic oil needs, a dependency equivalent to about 4.2 million barrels per day. This makes the entire energy import bill, and by extension the economy, acutely vulnerable to both price spikes and flow interruptions. While India is exploring alternative LPG import routes, shipments from the US and other suppliers would take significantly longer to reach Indian ports, creating a lag in supply that could strain inventories in the coming weeks. For now, the balance is one of managed strain, where diversification and partial access to the Hormuz route are mitigating a more severe shortage, but the underlying supply-demand tension remains high.

Inventory Buffers and Supply Chain Diversification

The immediate shock of the Hormuz disruption is being absorbed by two key structural factors: a deep inventory buffer and a rapidly diversifying supply basket. Together, they are buying time and reducing the risk of a severe domestic shortage.

First, India's crude oil import mix has become notably more resilient. The country has significantly reduced its reliance on the Gulf, with Russia now supplying about 20% of its total crude oil requirements, a volume of roughly 1.04 million barrels per day. This shift, driven by strategic sourcing and waivers for sanctioned crude, has been a major part of the government's risk-mitigation plan. As a result, non-Strait sources now account for 70% of supplies, up from 60% last year. This diversification means that even if Gulf flows are cut, a larger portion of the crude needed to run India's refineries is coming from alternative, conflict-free regions.

Second, inventory buffers are substantial. Combined stocks of crude oil and petroleum products are sufficient to meet domestic demand for 50 days. This is a critical safety net. Furthermore, the country's strategic petroleum reserves provide an additional 9.5 days of net import coverage. These stocks are being actively managed; refiners have held off on planned maintenance to maintain processing rates and build reserves, ensuring that the buffer is being used to meet short-term demand without depleting it too quickly.

The situation is different for LPG, where the diversification timeline creates a lag. While India has signed a contract to import about 2.2 million tonnes per year from the US Gulf Coast, shipments from the US and other suppliers could take longer to reach Indian ports than from the Gulf. The average transit time from the US is around 45 days, compared to just 7-8 days from the Gulf. This delay means that while alternative LPG supplies are being secured, they cannot provide immediate relief. The current crisis is being managed by the existing buffer of LPG stocks and the incremental flow of vessels through the strait, but the full benefit of this new supply chain will take weeks to materialize.

The bottom line is that India's energy system is not in a state of emergency, but it is under stress. The combination of a more diversified crude basket and deep inventory buffers is effectively absorbing the shock. However, the longer shipping times for alternative LPG supplies highlight a vulnerability in the cooking fuel chain. For now, the structural factors are holding, but they underscore the need for continued vigilance and investment in supply chain resilience.

Price and Cost Pressures: The Economic Impact

The immediate supply shock is now translating into tangible financial and operational costs across India's economy. The country's heavy reliance on imported energy means even modest price moves can have outsized effects, while supply chain disruptions are hitting specific sectors hard.

The sensitivity of India's energy economics is acute. With India importing more than 85% of its domestic oil needs, equivalent to about 4.2 million barrels per day, the nation is a direct conduit for global price swings. As noted by energy analyst Pankaj Srivastava, even "a few dollars' increase in [oil] prices can materially affect [India's] energy economics." This isn't just a headline risk. A sustained $10 per barrel rise in oil prices could widen India's current account deficit by 50 basis points, directly pressuring the rupee and the broader balance of payments. With oil prices having surged to over $79 per barrel recently, this pressure is already building.

The threat extends beyond crude to critical industrial inputs. The Middle East is a key source for both aluminium and fertilisers, and the disruption of trade flows is raising the spectre of shortages. In 2025, India imported an estimated 15.7 per cent of its primary aluminium from the United Arab Emirates. A sustained supply crunch here would directly impact manufacturing and construction, sectors vital to the economy's projected 7% growth in 2026. Similarly, the conflict threatens the flow of natural gas, which is essential for fertilizer production. Given that a little less than 30 per cent of natural gas use goes into making fertilisers, any supply disruption could feed into food inflation and agricultural costs.

The operational stress is also immediate and visible. The escalating conflict has disrupted the services of Indian airlines, forcing them to reroute flights around the Middle East. These longer, more fuel-intensive routes add significant costs to operations at a time when fuel prices are already elevated. This combination of higher fuel costs and increased flight time is squeezing airline margins and could lead to higher ticket prices for consumers.

The bottom line is a multi-pronged cost pressure. The economy faces a direct hit to its import bill from higher oil prices, sector-specific vulnerabilities in aluminium and fertiliser supply, and immediate operational inefficiencies for the aviation industry. While inventory buffers and supply diversification are providing a structural floor, the financial and logistical costs of the current disruption are being felt across the board.

Forward-Looking Commodity Balance: Catalysts and Risks

The current balance is one of managed strain, but the path forward hinges on a few critical catalysts and timelines. The primary risk is a prolonged blockade that depletes strategic stocks faster than alternative supplies can be secured. While India's inventory buffer is substantial, it is not infinite. The country's strategic petroleum reserves provide an additional 9.5 days of net import coverage, and combined stocks meet demand for 50 days. However, if the blockade persists into April and May, the pressure on these reserves will intensify, especially for LPG where the average transit time from the US is around 45 days compared to just 7-8 days from the Gulf. This lag means the full benefit of new contracts, like the one-year contract to import about 2.2 million tonnes per annum of LPG from the US Gulf Coast, will not materialize for weeks.

A key catalyst for easing this pressure is the resolution of the tanker release talks. Iran has asked India to release three tankers seized in February as part of negotiations for safe passage, according to sources. The recent movement of two Indian LPG carriers through the strait suggests this diplomacy is having a limited, incremental effect. If these talks succeed in securing the release of the remaining vessels, it would signal a de-escalation that could restore more predictable shipping lanes. This would directly alleviate the immediate crisis for cooking fuel and provide a breathing space for India to further ramp up alternative sourcing.

The timeline for securing alternative crude supplies from the US and West Africa is the most critical factor in maintaining the buffer. Indian refiners are actively securing crude from these regions, but the process is not instantaneous. The country is diversifying its oil basket to secure uninterrupted fuel imports, with a senior oil ministry official noting that non-Strait sources climbed to 70% after the Middle East conflict. However, the physical flow of these cargoes takes time. The 120 million barrels of Russian crude currently on the water includes some near India, but the broader supply chain from the US and West Africa requires vessels to be loaded, dispatched, and navigate to Indian ports. This creates a window where the system is vulnerable if the blockade remains in place.

The bottom line is a race against time. The immediate risk is a depletion of strategic stocks, particularly for LPG, if the blockade persists. The catalyst for relief is the resolution of the tanker talks, which could ease tensions and restore some flow. The long-term solution depends on the timeline for securing and delivering alternative crude supplies from the US and West Africa. For now, India's diversification and inventory buffers are holding, but the system's resilience is being tested by the pace of events in the Gulf.