The Strait of Hormuz is witnessing a resurgence of military tension, leaving global energy markets in a state of high alert. US President Donald Trump has announced the cancellation of the ceasefire with Iran, accompanying this with threats of potential strikes against Tehran. Furthermore, the declaration of a fresh blockade on the Strait of Hormuz has intensified global anxieties. If the escalating friction between Iran and the United States erupts into a prolonged conflict, it threatens to paralyze global oil supply chains. While India might secure alternative sources for crude oil from countries like Russia or the US, the critical question remains: where will the supply of LPG come from?
Impact of the Hormuz Blockade on India
Should the current US-Iran friction evolve into an intense, long-term war, India faces an exceptionally difficult scenario. Any instability in West Asia directly and immediately impacts the Indian middle-class household, as the nation is heavily reliant on this specific maritime corridor for its energy imports, crude oil, and essential domestic LPG supplies.
Surging Crude Oil Prices
If the Strait of Hormuz, widely considered the world's most sensitive maritime artery, is completely blocked for an extended period, it could trigger a situation far worse than the crises seen in March 2026. Experts anticipate that under such conditions, global crude oil prices could soar to between 120 and 130 dollars per barrel.
The Double Attack of Inflation and LPG Shortage
Even if India diversifies its crude oil procurement, the LPG situation is precarious. India imports more than half of its cooking gas requirements from Gulf nations like Saudi Arabia, Qatar, and the UAE. A shutdown of the Hormuz route would lead to a severe scarcity of LPG cylinders, causing prices to spike and severely disrupting the household budgets of the common man. Beyond cooking gas, the costs of fuel, food items, and fertilizers would also climb uncontrollably.
Impact on Export Business and Investments
India’s export sector is also at risk of grinding to a halt due to this war. Exports of electronics to the UAE and basmati rice to Iran would face significant disruptions. Total exports could see a decline of more than 50 percent. Additionally, India’s massive investments in the Chabahar Port in Iran, which serves as a gateway to Central Asia, could be left in a state of uncertainty.
Potential Relief for India
Amidst the tensions, there remains a glimmer of relief for India, provided the hostilities remain localized and the maritime route is not entirely severed. Currently, crude oil prices in the international market are holding steady between 75 and 80 dollars per barrel. India can leverage its robust strategy of sourcing crude oil from over 40 countries to navigate this crisis. Despite the risks, India could capitalize on discounted oil and gas supplies from Iran to stabilize its domestic inventory. If the supply of oil and gas continues without disruption, India’s strong economic indicators, such as its impressive quarterly GST collections, could help maintain GDP growth at around 7 percent.
Consequences for the Rest of the World
A prolonged conflict would spare no nation, from the superpower US to the wealthy Gulf states. In the US, a complete naval blockade in the Strait of Hormuz could push inflation back above 5 percent. This would force the Federal Reserve to keep interest rates elevated, severely slowing the pace of the American economy. Gulf nations (GCC)—including Saudi Arabia, UAE, Qatar, Kuwait, and Bahrain—could see their infrastructure targeted by Iranian-backed rebel groups. If water desalination plants and logistics hubs are hit, these countries may face critical shortages of drinking water and rations. Meanwhile, East Asian nations like China, Japan, and South Korea, which rely on this route for 80 percent of their energy, would face factory shutdowns and higher manufacturing costs globally. Simultaneously, Western Europe would be forced to rely on expensive American gas as supplies of LNG from the Gulf dry up, putting their winter energy security at risk.
