India Faces Energy Crunch As US-Iran Tensions Surge, Modi Pushes For Open Shipping Lanes |
Prime Minister Narendra Modi’s latest conversation with Iranian President Masoud Pezeshkian has brought India’s mounting energy anxieties into sharp focus, as the US-Iran conflict disrupts global oil flows and threatens critical supply routes. In his second call with Pezeshkian since the conflict began, Modi stressed the urgent need to keep shipping lanes open. “We expressed hope that this festive season brings peace, stability, and prosperity to West Asia. Condemned attacks on critical infrastructure… Reiterated the importance of safeguarding freedom of navigation and ensuring that shipping lanes remain open and secure,” he said.
The concern is well-founded. Iran’s effective chokehold over the Strait of Hormuz — through which nearly 21 million barrels of oil pass daily, accounting for roughly 27% of global supply — has triggered fears of a looming energy crisis. The bulk of this oil is destined for Asia, with India among the largest buyers. As the world’s third-largest oil importer, India remains acutely vulnerable to any prolonged disruption. The crisis is already rippling through global markets.
Oil prices have surged to around $114 a barrel, up sharply from pre-conflict levels of $63–70. In response, the United States has issued a temporary 30-day waiver allowing Indian refiners to continue purchasing Russian crude. US Treasury Secretary Scott Bessent said the move was aimed at “enable[ing] oil to keep flowing into the global market,” even suggesting India could buy Iranian crude already at sea. However, energy experts remain sceptical.
“Over time Indian companies had invested $18 billion in oil and gas assets in Russia. So, the Americans cannot say that we can’t get oil from there because that’s our own oil… For us, our government has made it very clear that we will buy oil from wherever it is available,” said energy expert Narendra Taneja. Recent data underscores a shifting supply mix. Russian oil imports, which had dipped below 1 million barrels per day late last year, have rebounded to an estimated 2.2 million bpd. At the same time, India has sharply increased crude imports from the United States, with shipments rising from 1.69 million tonnes to 6.31 million tonnes year-on-year between January and April.
The US share of India’s oil basket has climbed from 2% to 7%. Yet these adjustments offer only partial insulation. India’s strategic petroleum reserves provide a limited buffer. “For oil, we have strategic reserves for about 25 days… roughly 40 days of reserves,” Taneja noted, warning that prolonged disruption could expose the economy to severe shocks. The more pressing vulnerability lies in cooking gas. India depends on Qatar for nearly 40% of its LPG needs, with supply tied to the massive South Pars/North Dome gas field shared by Iran and Qatar. Unlike crude oil, LPG cannot be easily stored, leaving India with little strategic backup. Demand, meanwhile, is rising sharply.
LPG consumption is projected to reach 34 million metric tonnes by 2026, with around 60% met through imports. Daily requirements stand at roughly 80,000 tonnes — underscoring the fragility of supply chains. There are some signs of resilience. “Only 15% has been impacted… 85% of the export infrastructure… is intact… Qatar has not enforced a force majeure on India,” Taneja said, indicating continued supply stability for now. In response, New Delhi is accelerating diversification.
Union Petroleum Minister Hardeep Puri called a recent US LPG deal a “historic first,” adding that India is also exploring supplies from “Norway, Canada, Algeria, and Russia.” However, diversification comes at a cost. Longer shipping routes will raise logistics expenses, likely pushing up prices for consumers and businesses. Early signs of strain are already visible — from rising cooking gas costs to pressure on sectors such as hospitality and textiles. India may have managed the immediate shock, but the deeper lesson is stark. As the conflict deepens, the country’s energy security remains tightly bound to global fault lines — and the room for manoeuvre is narrowing.