Iran-Israel conflict disrupts Hormuz, India boosts energy shield

The escalating conflict between Iran, Israel, and the United States has thrown a spotlight on India's energy security, particularly concerning the vital maritime artery, the Strait of Hormuz. As a nation heavily reliant on energy imports, India is proactively implementing a multi-layered defense strategy to mitigate potential disruptions and ensure its economy remains powered and its households supplied. This strategy encompasses bolstering strategic petroleum reserves, diversifying import sources, and establishing emergency gas allocation protocols. India imports a substantial portion of its energy needs, with approximately 90% of its crude oil, 60% of LPG, and nearly 50% of LNG requirements being met through imports. This significant dependence makes the country particularly vulnerable to geopolitical instability in West Asia. The Strait of Hormuz, a narrow waterway through which roughly one-fifth of the world's seaborne oil and a significant portion of global LNG pass daily, has become a focal point of concern. Following retaliatory strikes between Iran and targets associated with Israel and the US, maritime traffic through the strait has seen a sharp decline, leading to increased insurance premiums for tankers and volatility in global energy markets. This real-time stress test has pushed India to re-evaluate and strengthen its energy security architecture. In response, New Delhi is enhancing its strategic petroleum reserves, which currently provide a buffer of approximately 250 million barrels, and is actively exploring new LNG strategies to ensure fuel stability. The government has also invoked the Essential Commodities Act to guarantee natural gas supply and has ordered refineries to divert key streams to higher priority sectors. This includes curtailing supplies to petrochemical plants, refineries, and power units to ensure domestic gas consumption needs are met. While immediate shortages are not anticipated, the crisis is expected to exert upward pressure on energy costs. Adding to the concerns, recent reports indicate that India is considering deploying naval ships to escort its vessels through the Strait of Hormuz. This move comes in response to requests from Indian shipowners seeking enhanced security for their carriers, as the strait has become a high-risk zone. Approximately 38 Indian-flagged commercial ships, carrying over 1,100 sailors, have been reported stranded in the Persian Gulf and the Gulf of Oman due to the escalating conflict. In light of these developments, the Union Shipping Minister has directed officials to take all necessary steps to ensure the safety of Indian seafarers and maritime assets. The crisis also has implications for India's fertilizer supply. Approximately 20-25% of India's fertilizer supply chain is exposed to disruptions due to the conflict and the blockade on the Hormuz, as shipments from the UAE, Qatar, Saudi Arabia, and Oman are routed through the strait. This poses a risk to the agriculture sector and food security for India's large population. Government officials have assured that India's crude oil supply remains secure, with approximately 70% of imports utilizing alternative routes. Two LNG cargoes are en route to further bolster the situation. Gas companies have procured LNG from alternate routes, and a Natural Gas Control Order is in place to manage supplies efficiently. Refineries are operating at full capacity, with a planned reduction in supply to petrochemical units to protect higher priority sectors. For LPG, India imports roughly 60% of its requirement, with 90% passing through the Strait of Hormuz. To maintain uninterrupted domestic supply, companies have been directed to boost production. The broader lesson for India is the need to move beyond crisis management and focus on crisis-proofing its energy sector. This involves further diversification of suppliers beyond the Gulf, increasing domestic production where feasible, exploring alternative pipeline and connectivity projects, and strengthening naval and maritime security capabilities to protect national interests in the Indian Ocean Region. The crisis underscores that energy security is intrinsically linked to national security and economic stability.

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