The escalating tensions in the Middle East, which are caused by more violence between Israel and troops supported by Iran, pose a direct threat to the world’s oil supplies. India is in the most danger. India is the third largest oil importer in the world. It gets about 85% of its crude oil from the Persian Gulf. This indicates that any troubles in this region that isn’t very steady could cause prices to go up and hurt the economy. The markets have already been rattled up by the recent missile exchanges and naval battles in the Red Sea. Brent crude futures have gone up 5% in only the last week. This article talks about how the situation in the Middle East could have a big impact on India’s energy and oil markets. It shows the hazards and India’s strategic alternatives by looking at recent events, expert perspectives, and examples from the past.
Where the recent rise originated from
The most recent flare-up began when Hamas attacked Israel in October 2023. This touched off a chain reaction throughout the region. Hezbollah’s rocket attacks from Lebanon, Houthi drone attacks on Saudi oil infrastructure, and Iran’s direct missile strikes have converted little conflicts into a war on several fronts. By March 2026, the fighting has spread, and there are rumors of Israeli planes bombing Iranian proxy camps in Yemen and Syria. People have threatened to cut off oil routes because of this.
Some of the most crucial things that set off are:
Houthi strikes in the Red Sea have hurt almost 50 commercial ships since late 2025. Now, ships have to go around Africa’s Cape of Good Hope, which adds 10 to 15 days to shipping times.
Iran’s Nuclear Posturing: Tehran’s decision to speed up uranium enrichment to 90%, or weapons-grade levels, has made people more scared that strikes on its oil export ports will happen before they do.
Proxy warfare are growing worse and worse. Militias in Iraq are attacking U.S. sites, which makes it harder for Gulf allies like Saudi Arabia and the UAE.
These things have already made the Strait of Hormuz smaller. It carries 20% of the world’s oil supply per day, or 21 million barrels. This chokepoint is particularly crucial for India because it gets 40% of its oil from Iraq, Saudi Arabia, and the UAE.
India’s Dependence on Oil from the Middle East
India’s energy landscape includes the Middle East. In the fiscal year 2025–26, the country brought in 205 million metric tons of crude oil. The main suppliers came from the Middle East, supplying 5.2 million barrels per day (bpd). Iraq sends 22% of all imports (1.1 million bpd), Saudi Arabia supplies 18% (0.9 million bpd), and the UAE sends 12% (0.6 million bpd). Being close by, having inexpensive prices, and having long-term contracts all make this dependence. India’s basket is still primarily from the Gulf because its refineries, like Reliance Jamnagar, work best with heavy Arabian crudes. This is not the same as different importers like China, which buys oil from Africa and Russia.
The weakness is clear: the International Energy Agency (IEA) says that blocking the Strait of Hormuz for a month may raise the price of oil around the world by $20 to $30 per barrel. India will have to pay an extra $15 to $20 billion a year to bring in oil because it uses 5.5 million barrels a day. This will make prices go up and the current account deficit larger.
Changes in prices and problems in the market straight away
The battle in the Middle East has had an immediate impact on oil markets. Brent crude, which is considered as a benchmark in India, stayed at $75 per barrel in early March 2026 but went up to $82 after Iran made more threats. The Indian basket prices, which are an average of imports weighted by their value, went up 4.2% in a week. This made it hard for state-run gas stations like Indian Oil Corporation (IOC).
The cost of shipping is increasing higher. Drewry Shipping Consultants reported that the cost of shipping containers from the Gulf to India has gone up to $8,000 per 20-foot equivalent unit (TEU).
India’s strategic petroleum reserves (SPR) in Manesar, Padur, and Chandikhol only hold 5.3 million tons, which is only enough for 10 days of imports. The IEA needs this for 90 days, which is a lot more than this.
Refinery Margins Squeeze: Bharat Petroleum and other companies witnessed their gross refining margins (GRM) decline from $12 per barrel to $8 per barrel. This affected their profits because the cost of feedstock was going up.
Areas that are very important and in danger:
Transportation and Logistics: Diesel fuels 70% of freight, which represents 40% of India’s oil use. If prices go up by 20%, logistics costs may go up by 8%. This would harm small and medium-sized firms the most.
The costs of plastics, fertilizers, and textiles, which are India’s principal exports, would go up because petrochemical feedstocks like naphtha would cost 15–20% more.
Prices for aviation turbine fuel (ATF) and LPG could go up by 10–15%, which will harm families and airlines like IndiGo, which already has halted fleets.
The financial crunch is also becoming worse. Subsidies for LPG and fertilizers, which were thought to be worth ₹2.5 lakh crore for FY26, could go increased by 20%. The PPAC reports that the government’s under-recovery, which is the difference between market prices and subsidized prices, was ₹25,000 crore in the first quarter of FY26.
Experts like former petroleum secretary Tarun Kapoor say, “India’s energy import bill, which was $140 billion last year, could grow to $180 billion if the conflict continues, which would cause the rupee to lose value and import duties to go up.”
India’s efforts to diversify and its strategic responses
New Delhi has known about these risks for a long time, and after the attacks in Abqaiq in 2019, it has been diversifying even faster. The “all-of-supply” strategy looks for sources outside of the Middle East. It raises Russia’s share from 2% in FY23 to a target of 35% in FY26 through 2 million bpd of discounted Urals crude, the U.S. to 12% with ExxonMobil and Chevron spot cargoes, Africa (Nigeria, Angola) to 15% through ONGC Videsh stakes, and Latin America (Venezuela, Brazil) to 8% with Rosneft-mediated swaps. The move in Russia has changed the game. They are now selling 1.8 million barrels a day for $60 to $65 per barrel, which is $15 less than Brent. This saves $10 billion every year. But there are still quality issues. India’s refineries have to mix Russia’s sour crude oil with other oils because it clogs them.
Pushes from within include:
Biofuel Blending: By 2026, the ethanol mix had reached 15%, which is the same as 1 million tons of oil.
Renewable Ramp-Up: 100 GW of solar electricity and 50 GW of wind power; green hydrogen pilots are taking place in Gujarat.
Reserve Expansion: The second phase of SPR is happening today, and the goal is to achieve 12 million tons by 2028.
PM Modi’s trips to Saudi Arabia and Iran illustrate that India keeps its relationships balanced, which is called “multi-alignment.” The I2U2 coalition (India, Israel, the US, and the UAE) wants to strengthen energy security by sharing technology. There are many ways to go to the Chabahar port in Iran.
Global Viewpoints and Expert Opinions
Vivek Dhar, an energy strategist at Commonwealth Bank, says, “A full Hormuz blockade is low-probability but high-impact—India’s exposure is twice China’s because it is less diversified.” “Geopolitical risk premiums could add $5–10 per barrel on a regular basis,” says Faith Birol of the IEA.
The U.S. has sent 50 million barrels from the SPR to other countries, but there isn’t much room because Europe switched to LNG during the Ukraine crisis. OPEC+ has 5.5 million bpd of spare capacity, which is good, but Saudi Arabia doesn’t want to do anything because it is fighting with Iran, so it is not as valuable.
There are many examples from history. For example, the Yom Kippur War in 1973 caused prices to go up four times, and the Gulf War in 1990 caused prices to go up by 100%. India was only getting started when it faced stagflation, which taught policymakers a lot.
India’s effects on the world as a whole
The turmoil in the Middle East is making things harder for Indians living abroad in many ways than just money. There are 9 million Indians living in the Gulf, and they send home $80 billion a year, which is 25% of the money that comes in. If things grow too tense, people may have to leave.
Houthi’s presence in the Arabian Sea is a security risk for Indian naval patrols. The fact that the INS Vikrant is being sent implies that the country is becoming aggressive.
Fighting could trigger spills that could contaminate the Gulf’s fisheries, which are essential for India’s seafood imports.
The conflict in the Middle East is becoming worse, which is bad news for India’s oil markets and energy security.
