India's energy supplies secure against instant risks from US-Iran tensions

Officials say India has adequate crude oil, LNG and LPG inventories to withstand any near-term supply disruption even as renewed US-Iran tensions push up crude prices

Fresh tensions between the US and Iran are unlikely to disrupt India's energy supplies in the short term, as the country has built up adequate fuel inventories to cushion against any immediate supply shock, according to people familiar with the matter.

 

"We are well-stocked currently and have tied up energy supplies for the short term. We are not dependent on the Strait of Hormuz for supplies of crude oil, LNG and LPG. The situation is being monitored and reviewed," said a senior government official.

 

The prospect of restricted shipping through the Strait of Hormuz poses a significant challenge for India, given the country's heavy reliance on the strategic waterway for its crude oil, liquefied natural gas (LNG) and liquefied petroleum gas (LPG) imports. On July 8, US President Donald Trump said the ceasefire between the US and Iran was "over" following renewed military strikes, marking the most serious escalation since the two sides reached a ceasefire agreement in mid-June that had brought an end to the conflict.

 

Indian refiners have secured crude oil supplies through August and do not foresee any immediate supply disruptions, a refinery executive said, requesting anonymity. "We will have to see if vessel movement through the Strait of Hormuz is affected. For now, we do not know if vessel movement is completely halted through the route," the executive said.

 

Meanwhile, Union Oil Minister Hardeep Singh Puri said on July 2 that India has crude oil stocks sufficient for 60 days, LNG inventories for 60 days and LPG inventories for 45 days. India had recently lifted several restrictions on LPG and natural gas supplies to industrial users following the reopening of the Strait of Hormuz and the resumption of peace talks between the US and Iran. The government does not plan to immediately revisit those orders despite the renewed tensions, the official said.

 

The collapse of the US-Iran peace talks has also pushed crude oil prices to $79 per barrel from a low of $70 per barrel last week, once again threatening to push up India's oil import bill and inflation. "In the near term, higher crude prices present a negative macroeconomic implication for India, as a sustained rise in oil prices could widen the oil import bill, put pressure on the current account deficit, add to inflationary pressures and keep the rupee under pressure," said Maulik Patel, Head of Research at Equirus Securities.

 

Oil markets reacted quickly to the renewed geopolitical risk, with Brent crude climbing to close to $79 per barrel, its highest level since June 19. Even if no sustained physical disruption materialises, uncertainty around vessel safety, insurance costs, potential delays and the risk of further retaliation is likely to keep volatility elevated in the near term, said Rystad Energy, a Norway-based research firm.

 

Vessel movements have already fallen sharply, from around 20 vessels on July 6 to just 11 the following day, while traffic so far today appears to have come to a complete halt.