Iran closes Strait of Hormuz: Is India in a fix; what are its options?

US-Israel-Iran War: Iran has closed the Strait of Hormuz and has threatened to fire on any ship that tries to pass, as per Iranian media. "The strait is closed. If anyone tries to ​pass, the heroes of the Revolutionary Guards and the regular navy will set ​those ships ablaze," said Ebrahim Jabari, a senior adviser to the Iranian Revolutionary Guards commander-in-chief. 

This spells trouble for a host of nations as it would choke a fifth of global oil flows, shooting up crude prices sharply. The strait is the world’s most vital oil export route, connecting Gulf oil producers like Saudi Arabia, Iran, Iraq and the UAE with the Gulf of Oman and the Arabian Sea.

The closure has come after years of threats by Iran to block the waterway in response to any attack on the nation. 

The strait, 33 km wide at its narrowest point, facilitates about 20 per cent of world’s daily oil consumption to pass through. 

IS INDIA IN A FIX?

Analysts warned that a prolonged disruption in shipments could significantly impact the country, especially given India's growing energy needs and low inventory levels. They said India is the most vulnerable major economy to crude supply shocks from the Middle East conflict due to its limited oil reserves and heavy reliance on imports from the region. 

Asia imports nearly 90 per cent of the Middle East's oil exports, with India particularly exposed because of reduced storage capacity and recent changes in sourcing. Both China and India get about half of their crude oil from the Middle East. However, China has at least six months of crude supplies in storage, while India's inventories are much lower. Ajay Parmar, director of energy and refining at ICIS, noted that India's lower inventories make it more vulnerable in this situation.

As of January, the Middle East accounted for around 55 per cent of India's crude imports, about 2.74 million barrels per day, the highest since late 2022. This rise follows Indian refiners reducing Russian oil imports under external pressure.

India's storage capacity is limited. Oil Minister Hardeep Singh Puri told lawmakers last month that India can store enough crude and fuel to last about 74 days, but refining sources said current inventories cover only about 20 to 25 days.

In comparison, Japan's oil reserves can cover 254 days of consumption, and South Korea's stockpiles can last about 208 days. These numbers highlight India's higher risk in case of supply disruptions.

With global prices rising, the federal oil ministry said it will take all necessary steps to keep fuel available at affordable rates. This might include seeking oil from elsewhere. It remains to be seen if India would increase its uptake of Russian oil again since the US has not clarified its position on possible waivers for Russian oil tariffs for India. Secretary of State Marco Rubio said the Departments of Treasury and Energy would announce measures to ease rising energy prices.