Tensions in the Middle East have risen sharply after the US joined Israel in launching an attack on Iran. In response, Iran’s parliament has reportedly approved the closure of the Strait of Hormuz—a vital sea route through which nearly 20% of the world’s oil and LNG (liquefied natural gas) is transported.
Although Iran has threatened to block this waterway before, it has never done so because it would also damage its own economy. But if it does follow through now, it could cause major disruptions globally.
Why This Matters to India
India depends heavily on crude oil shipped through the Strait of Hormuz. About 45-50% of India’s oil imports come from Iraq, Saudi Arabia, Kuwait, and the UAE—all of which ship oil via this route. In FY2025, Russia provided 36% of India’s crude oil, but replacing the disrupted Middle East supply won’t be easy.
Even if countries like Saudi Arabia and the UAE try to use pipelines instead of sea routes, they can only divert a small portion of the oil, which may not be enough if the crisis escalates.
Economic Impact on India
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A $10 increase in oil prices could raise India’s oil import bill by $13–14 billion and increase the Current Account Deficit (CAD) by 0.3% of GDP.
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If oil averages $80–90 per barrel in FY2026, the CAD could rise to 1.5–1.6% of GDP (up from an earlier forecast of 1.2–1.3%).
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Higher oil prices will pressure the Indian Rupee (INR) and could worsen inflation:
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Wholesale Price Index (WPI) could rise by 80–100 basis points (bps)
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Consumer Price Index (CPI) may rise by 20–30 bps
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Economic growth could also slow. ICRA warns that GDP growth, currently projected at 6.2%, may be revised downward if oil prices stay high.
Sectors That Could Be Affected
1. Oil Marketing Companies (OMCs) – Negative Impact
These companies may see lower profit margins as their fuel costs rise and they may not fully pass it to customers due to price regulations.
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Stocks to watch: HPCL, BPCL, IOC
2. Oil Exploration Companies – Positive Impact
These companies benefit because they earn more for the oil they produce.
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Stocks to watch: ONGC, Oil India
3. Paint Industry – Negative Impact
Paint production is highly oil-dependent. Rising oil prices increase costs and reduce profits.
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Stocks to watch: Asian Paints, Berger Paints, Kansai Nerolac
4. Tyre Manufacturers – Negative Impact
Crude oil is a raw material for synthetic rubber and other inputs. Costs will go up.
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Stocks to watch: MRF, CEAT, JK Tyres, Apollo Tyres
Rising LNG Prices Add Pressure
Just like oil, LPG and LNG prices are also expected to rise.
Impact by Sector:
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Power Sector: Gas-based power will become more expensive and less competitive.
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Stocks affected: Petronet LNG, GAIL, Adani Total Gas
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City Gas Distribution (CGD): Higher gas prices will hurt margins and competitiveness.
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Stocks affected: Mahanagar Gas, Indraprastha Gas
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Fertilizers: Subsidy burden will increase as input costs rise, especially for urea and phosphatic fertilizers.
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Stocks affected: Coromandel International, Chambal Fertilisers, Travancore Fertilisers
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Industrial Firms: Petrochemical and refinery companies may face cost pressures or shift to alternative fuels.
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Stocks affected: Petronet LNG, Indian Oil
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In Short:
If the Strait of Hormuz is closed, India could see:
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A spike in crude and gas prices
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Higher inflation and CAD
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Pressure on GDP growth and the rupee
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Varying effects across industries—some hurt, some benefit
It’s a situation being watched closely by markets, traders, and policymakers alike.
