Hormuz Blockade Explained: Why Trump’s Move Could Shake Oil, China and India

On Sunday, after negotiations lasting over 20 hours between the US and Iran failed to yield a ceasefire, US President Donald Trump announced a blockade of the Strait of Hormuz. The strait, a vital waterway for global energy trade, was opened with conditions by Tehran following Washington’s agreement to a fragile two-week temporary ceasefire last week. However, with Tehran not agreeing to US demands to dismantle its nuclear programme and surrender enriched uranium, Trump announced that the US Navy would commence a blockade.

“Effective immediately, the United States Navy, the finest in the world, will begin the process of blockading any and all ships trying to enter or leave the Strait of Hormuz,” Trump wrote in a post on his social media platform Truth Social. “Any Iranian who fires at us, or at peaceful vessels, will be blown to hell!”

Following his announcement, the US Central Command said in a statement, “The blockade will be enforced impartially against vessels of all nations entering or departing Iranian ports and coastal areas, including all Iranian ports on the Arabian Gulf and Gulf of Oman.”

Why is the US blocking the Strait?

In the temporary 10-point ceasefire agreed between Washington and Tehran, Iran demanded that the strait be opened, but vessels passing through it should pay a ‘toll.’ The toll fee would be used for reconstruction of critical infrastructure destroyed during the conflict. Some vessels that passed through the strait reportedly paid up to $2 million per ship. According to reports, Trump now effectively wants to shut down this significant source of revenue for the Iranian government.

In an interview with Fox News, Trump said, “We’re not going to let Iran make money on selling oil to people that they like and not people that they don’t like.” He stated the goal was to let ‘all or nothing’ pass through the waterway.

How Will the US Blockade Impact Oil Trade?

On Monday, markets across the globe reacted sharply, with oil prices rising over 8% in early trade. Benchmark Brent crude and West Texas Intermediate both breached $100 per barrel, reinforcing analysts’ warnings of a potential global economic slowdown that risks triggering a recession.

The volatile oil market will bear the severe brunt of any further blockade, with analysts already warning that it will not be feasible for the global economy to prolong the war and keep the strait shut beyond mid-May. Iran exported nearly 1.84 million barrels per day (bpd) of crude in March and has shipped 1.71 million bpd so far in April, according to a Reuters report citing Kpler data.

Before the war, most Iranian oil exports were shipped to China, the world’s top crude importer. Last month, the US unveiled a sanctions waiver that enabled other buyers, including India, to import Iranian oil. A prolonged blockade of the strait will lead to elevated crude prices and supply chain disruptions, which could take several weeks or even months to stabilise even after a ceasefire.

Possible confrontation with China

According to media reports citing an analysis by the Los Angeles Times, the US blockade could trigger a confrontation with China, as the country relies heavily on the strait for global trade. Over half of Beijing’s oil imports pass through the Strait of Hormuz, with China recently warning that “access to shipping must be guaranteed.” According to the report, the Trump administration sees this as a strategic chokepoint to pressure China into influencing Tehran to make concessions. China’s diplomatic role was evident when it convinced Tehran to accept an initial ceasefire.

How Did the Iran Blockade Impact India?

The war began on February 28, following which global oil prices surged to as high as $119 per barrel. India, being an import-dependent country, was particularly exposed due to its reliance on a ‘just-in-time’ supply system. Unlike crude oil, India does not maintain strategic reserves for LNG and LPG due to high infrastructure costs and the lack of advanced technology required for storage.

In the following weeks, India faced one of the worst LPG crises in recent history, prompting government intervention. The central government introduced policy measures, including prioritising households over industries for LPG supply. The Centre also slashed excise duty on petrol and diesel, which is estimated to cost nearly ₹1.3 lakh crore to the exchequer.

The rupee weakened for several days, breaching the psychologically crucial level of 95 per dollar due to panic buying by oil importers and foreign portfolio investors. The Reserve Bank of India, in a rare policy move, directed banks to unwind their dollar exposure in offshore markets in a bid to limit the pace of the rupee’s depreciation. According to ratings agency estimates, India’s current account deficit is expected to widen to 2% of GDP.

The Strait of Hormuz remains one of the world’s most critical energy chokepoints, and any prolonged disruption could have ripple effects across oil prices, inflation, and global growth. The US blockade not only escalates tensions with Iran but also introduces fresh uncertainty for major energy importers such as India and China, both heavily reliant on stable crude flows through the route. While Washington has signalled openness to negotiations, markets remain wary that continued geopolitical friction could prolong supply disruptions and keep energy prices elevated.