India better prepared to handle Strait of Hormuz disruption this time

India has secured crude oil and LPG supplies for the near term, limiting the immediate impact of the renewed Strait of Hormuz closure, though prices are expected to rise

India is better prepared to meet its near-term energy needs despite fresh supply disruptions triggered by the closure of the Strait of Hormuz by Iran on July 11, experts and industry officials said.

 

The US and Iran exchanged fresh strikes early Sunday after Tehran attacked a vessel transiting the Strait of Hormuz, alleging it had sailed through an unauthorised route, further clouding prospects for a resolution to the conflict.

 

While the renewed tensions are expected to push up energy prices, India’s supply outlook is likely to remain more resilient than during the earlier phase of the conflict.

 

“Energy prices would shoot up with the closure of Hormuz again. Procurement costs for September and October are likely to rise. However, we are in a comfortable position this time. We have secured crude supplies till August and tied up LPG imports. We might face some issues with LNG, but those should be manageable,” a senior refinery executive said.

 

 

Vessel traffic through the Strait of Hormuz was virtually at a standstill on Saturday, with only two ships approaching the strategic waterway. On July 8, US President Donald Trump said the ceasefire with Iran was “over” after renewed military strikes, marking the most serious escalation since the two sides agreed to a truce in mid-June.

 

“The situation is very fluid. We will have to see how durable the closure is. The risk premium on crude is likely to increase by $10-$15 a barrel, pushing oil prices to $80-$85 a barrel. On the supply side, markets are better prepared this time. Non-Opec production has increased, providing greater flexibility, while India has diversified its sourcing,” said Hitesh Jain, lead analyst at Yes Securities.

 

Brent crude prices rose to nearly $79 a barrel, its highest level since June 19, as markets reacted to the renewed geopolitical tensions.

 

Union Petroleum and Natural Gas Minister Hardeep Singh Puri said on July 2 that India had crude oil stocks sufficient for 60 days, LNG inventories for 60 days and LPG inventories for 45 days. India had also eased restrictions on LPG and natural gas supplies to industrial users after the Strait of Hormuz reopened and peace talks resumed. A government official said there were no immediate plans to reverse those measures despite the latest escalation.

 

Experts said the renewed disruption underscored the need to further diversify India's energy sources and accelerate electrification of the transport sector to reduce vulnerability to geopolitical shocks.

 

“In the long term, we have to diversify our energy sources more deeply and strengthen domestic energy security through measures such as greater electrification of transport and wider use of biofuels. However, these measures will take time to meaningfully reduce dependence on fossil fuels,” said Santosh Kamath, managing director at Alvarez & Marsal.