India is known to depend largely on imports for its energy needs. Even though there is no major immediate problem for India’s oil requirements at present, if the ongoing war between the United States, Israel, and Iran continues for a long time, difficulties seem inevitable. Unlike in the past, this time Iran is not sparing the United Arab Emirates either. It is specifically targeting American bases located in those countries and carrying out attacks. It is also targeting selected American companies. Whatever the reasons may be, there are clear indications that this war will now have a severe negative impact on global trade and international markets. In particular, Iran’s announcement that it is closing the Strait of Hormuz, a crucial route for global oil transportation, is causing concern among Asian countries.
The Strait of Hormuz lies between Iran and Oman. It connects the Persian Gulf and the Gulf of Oman to the Arabian Sea. This strait, which is approximately 167 kilometers long, has a width of 33 kilometers. Nearly 20 percent of the world’s oil and gas supply passes through this corridor every day. Around 22 million barrels of crude oil are supplied daily to Asian countries through this route. It is also well known that large quantities of LNG from Qatar are exported to other countries through this same route. Due to the current tensions, dozens of tankers are anchored outside the Gulf. In simple terms, there is now a traffic jam at sea. Iran has issued warnings stating that the Strait of Hormuz has been closed and that ships approaching this side will be set on fire. This is now the reason for the traffic jam of vessels in Hormuz.
India imports nearly 55 percent of its crude oil from the Middle East. Approximately 2.7 million barrels per day are imported through this route. Estimates suggest that India’s oil storage capacity is sufficient for only about 74 days. In this context, if the Strait of Hormuz is closed, India will face a severe impact. An increase in Brent crude prices will directly raise petrol and diesel prices. Rising fuel prices will affect the transportation, food, and manufacturing sectors. As a result, inflationary pressures will begin. Higher spending on oil generally weakens the rupee. Already, due to the fall of the rupee, the rising cost of imports is affecting foreign exchange reserves. There are signs that this risk could increase further. Iran possesses the fourth-largest oil reserves in the world. China purchases large quantities of oil from Iran. Iran also exports oil to India. If Hormuz is closed, Iran too will have to suffer severe losses. Even so, it is not showing any hesitation in this matter now.