NEW DELHI: India is facing growing pressure on its energy security after two major external shocks converged: the United States’ tightening of access through the Strait of Hormuz and the expiry of a key waiver that had allowed continued imports of discounted Russian crude.
According to recent reports, including a CNBC Asia-Pacific analysis, the U.S. has begun restricting ships from entering or exiting Iranian ports via the Strait of Hormuz – one of the world’s most critical oil chokepoints – as part of efforts to pressure Tehran amid ongoing peace negotiations. The move has disrupted a route that carries a significant share of global crude oil shipments.
The Strait of Hormuz is especially vital for India, which depends on imports for more than 85% of its crude oil needs. Analysts estimate that India may have already lost access to large volumes of oil previously transported through the route, forcing refiners to seek alternative and often more expensive supplies.
The strain has been compounded by the expiration on April 11 of a U.S. waiver that had allowed countries to purchase Russian crude under specific conditions. The waiver had enabled India to continue importing discounted Russian oil even as Western sanctions restricted global trade flows.
In March alone, India reportedly imported around 1.5 million barrels per day of Russian crude, taking advantage of a short-term authorization that temporarily eased restrictions. That flexibility has now ended, removing a key buffer at a time when global oil markets remain tight.
Mukesh Sahdev, chief oil analyst at energy intelligence firm XAnalysts, told CNBC that India is now confronting a dual supply shock. “India is facing a mounting supply squeeze with the loss of Iranian barrels, plus not getting the Russian barrels,” he said, pointing to the simultaneous disruption of two major supply sources.
The country’s vulnerability is further underscored by its limited strategic reserves. India holds roughly 160 million barrels in storage — equivalent to about 30 days of consumption — compared with countries like China, which reportedly maintains reserves sufficient for nearly 300 days.
India imports around 5.5 million barrels of crude oil per day, making it the world’s third-largest oil importer. Any sustained disruption in supply routes or pricing shocks can quickly ripple through the economy, affecting inflation, trade balance, and industrial costs.
Energy analysts say the combined impact of Hormuz restrictions and the waiver expiry could push global oil prices higher, adding pressure on import-dependent economies such as India. Brent crude has already shown volatility amid geopolitical tensions linked to the Iran conflict and supply uncertainty.
The broader economic impact is already visible. Recent HSBC Purchasing Managers’ Index data showed India’s private sector activity slowing to its lowest level since October 2022, with firms citing instability in the Middle East, inflationary pressures, and supply chain disruptions as key concerns. India’s finance ministry has also flagged “considerable downside risk” to its growth forecast of 7.0%–7.4% for the financial year ending March 2027 due to rising energy costs.
The geopolitical dimension adds further complexity. India has historically balanced its energy imports between the Middle East and Russia, but shifting sanctions regimes and regional conflicts have repeatedly disrupted this strategy.
Samir Kapadia of the Vogel Group noted that Indian policymakers are increasingly constrained by external pressures. “They’re on a seesaw right now, trying to balance the expectations of the United States,” he said, adding that there is “no easy out for India” in the current environment.
While the United States has at times issued temporary waivers to stabilize global markets, experts say the latest lapse could push prices higher unless extended or replaced with alternative arrangements. Rystad Energy analysts noted that markets are already tight and expect further volatility if supply disruptions persist.
Despite rising concerns, India’s Ministry of Petroleum and Natural Gas has claimed that domestic refineries are currently operating at high capacity and crude inventories remain adequate. However, officials have not ruled out future risks if external conditions worsen.
For now, India finds itself navigating a narrowing set of options – squeezed between geopolitical tensions in the Middle East and shifting U.S. sanctions policy on Russian oil – both of which are reshaping global energy flows.
