Nearly 30 percent of global oil and a third of the world’s LNG (liquefied natural gas) passes through the strait daily and its closure would immediately reduce global supplies triggering a spike in prices
New Delhi: Any blocking or disruption of traffic through the Strait of Hormuz — a narrow passage connecting the Persian Gulf to the Arabian Sea — will have significant global and regional impact, including for India’s energy security, strategic affairs experts said on Sunday.
Further escalation of the ongoing war between Iran and Israel will have wider implications for India’s trade with West Asian countries, including Iraq, Jordan, Lebanon, Syria, and Yemen, say experts.
Following the US bombing of three major Iranian nuclear sites, Tehran has indicated that closing the Strait of Hormuz for shipping is one of the options on the table to pressure its adversaries.
Nearly 30 percent of global oil and a third of the world’s LNG (liquefied natural gas) passes through the strait daily and its closure would immediately reduce global supplies triggering a spike in prices, they said.
The closure of the narrow passage would have significant global repercussions across energy markets and it will impact India’s energy security as well, Dr Laxman Kumar Behera, Associate Professor at Special Centre for National Security Studies at the Jawaharlal Nehru University, told PTI.
Behera said any disruption in the critical shipping lane will majorly impact India’s crude oil import from Iraq and to an extent from Saudi Arabia.
Captain D K Sharma (retd), a former Indian Navy spokesperson who closely follows developments in the Gulf region, said Iran’s threat to block the Strait of Hormuz could lead to significant disruptions in global oil trade.
Any disruption in shipping traffic could impact insurance premiums, causing costlier rerouting of oil shipments, he argued.
“Oil prices are expected to surge due to the increased tensions in the region, with some analysts predicting prices to reach USD 80-USD 90 per barrel or even USD 100 per barrel if Iran responds with retaliatory measures,” he noted.
Sharma also said that the currencies of the countries in the region may experience significant volatility, and investors may look for other stable markets.
“We are in for big trouble now because of this war. It will have a cascading effect on India’s trade with West Asian countries,” Mumbai-based exporter and founder chairman of Technocraft Industries India Sharad Kumar Saraf said.
Saraf said that his company is also holding back consignments to both these countries. Technocraft Industries manufactures drum closures, nylon and plastic plugs, capseal closures, and clamps.
“There will be a cascading effect of this war,” he added.
Another exporter said that the Indian traders community is already reeling under the impact of the Israel-Hamas conflict and involvement of Yemen-backed Houthis’ attack on shipping vessels in the Red Sea. Due to that, shipping lines from India were taking consignments from the Cape of Good Hope, encircling the African continent.
Now, because of the Iran-Israel war, another key trading route – the Strait of Hormuz – is getting affected.
“This route will hit the movement of oil tankers. I have a feeling that oil tankers will find new routes but that will push crude oil prices. It will have implications on inflation as crude oil prices are the mother of all prices,” Saraf said.
According to a recent analysis by the International Energy Agency, even a brief disruption of passage through the Strait of Hormuz will have a significant impact on oil markets.
“With geopolitical and economic uncertainties affecting oil producers and consumers alike, oil supply security remains high on the international energy policy agenda,” it said.
The US on Sunday morning bombed three major nuclear sites — Fordow, Natanz and Isfahan — in Iran, bringing itself into the Israel-Iran conflict.
Later, President Donald Trump said the Iranian nuclear sites were “totally obliterated”.
Behera said Iran will also face economic consequences if it shuts down the Hormuz strait as such a move will severely cripple Tehran’s exports.
Since the start of Iran’s hostilities with Israel, Iranian officials have spoken about the possibility of shutting the Strait of Hormuz.
Mohammad Javad Hosseini, the deputy chief of mission at the Iranian embassy, on Friday said closing the Strait of Hormuz is an option.
“We have many things on the table, but it doesn’t mean that we are going to do it now. It depends on the situation and how the other players want to go. If they want to solve the problem, definitely some of these things will be put aside,” he said.
Think tank Global Trade Research Initiative (GTRI) said that a wider regional escalation could threaten India’s much larger trade with the broader West Asian region, including Iraq, Jordan, Lebanon, Syria, and Yemen, where Indian exports total USD 8.6 billion and imports stand at USD 33.1 billion.
“Any disruption to shipping lanes, port access, or financial systems in this corridor would severely impact India’s trade flows, inflate freight and insurance costs, and introduce fresh supply chain risks for Indian businesses,” GTRI Founder Ajay Srivastava said.
India’s exports to Iran stood at USD 1.24 billion in FY2025, with key items including Basmati rice (USD 753.2 million), banana (USD 53.2 million), soya meal (USD 70.6 million), Bengal gram (USD 27.9 million), and tea (USD 25.5 million). Imports stood at USD 441.8 billion last fiscal.
With Israel, India’s exports stood at USD 2.1 billion and USD 1.6 billion in imports in 2024-25.
He said that the ongoing US-Israel strikes on Iran and the threat of wider conflict could significantly disrupt this trade.
Payment channels already strained by US sanctions may face further blockages, while heightened shipping risks in the Gulf could drive up insurance costs and delay shipments.
“Perishable exports like rice, bananas, and tea are especially vulnerable. A prolonged conflict could dampen Iranian demand and squeeze Indian exporters, particularly in the agricultural sector,” Srivastava said.
GTRI said that a key concern is the potential disruption to the Strait of Hormuz, through which roughly 60-65 per cent of India’s crude imports transit.