Iran Threatens to Block Strait of Hormuz, Limited Impact on India Likely

The United States have joined the Israel-Iran conflict by conducting “very successful” airstrikes, as President Donald Trump described them, on three of Iran’s nuclear facilities: Fordow, Natanz, and Isfahan. Announcing the operation on Saturday, Trump confirmed that US B-2 bombers had dropped a full payload of bombs on the primary target, Fordow.

As a result of the attacks, concerns mounted that Tehran might shut down the Strait of Hormuz, according to a report by EuroNews. The Strait of Hormuz is one of the world's most critical chokepoints, through which a fifth of global oil and gas supply flows. The report added that any move to block the strait would carry significant risks for Europe.

It came to the surface after Sardar Esmail Kowsari, a commander in Iran's Islamic Revolutionary Guard Corps and a member of parliament, told local media that shutting down the strait “is under consideration,” adding that “Iran will make the best decision with determination.”

“Our hands are wide open when it comes to punishing the enemy, and the military response was only part of our overall response,” Kowsari was quoted by EuroNews.

Does Strait of Hormuz Matter to India?

Nearly 20% of the world’s oil and a substantial portion of liquefied natural gas (LNG) pass through the Strait of Hormuz.

India is also dependent on this oil chokepoint since about 2 million barrels per day (bpd) of crude oil out of its total import of 5.5 million bpd transits through it. Overall, India sources about 40% of its supplies from West Asian nations such as Iraq, Saudi Arabia, the United Arab Emirates and Kuwait. These countries export crude oil to India through the Strait of Hormuz route.

However, in recent years, Russia has emerged as a major supplier of crude oil to India, with imports from Moscow now surpassing the combined volumes from the Middle East.

In June, Indian refiners imported between 2-2.2mn bpd of Russian crude—the highest level in the past two years—exceeding the roughly 2mn bpd collectively sourced from Iraq, Saudi Arabia, the UAE and Kuwait, according to preliminary trade data from Kpler.

Russian oil (Urals, ESPO, Sokol) is logistically detached from Hormuz, flowing via the Suez Canal, Cape of Good Hope, or the Pacific Ocean.

Also, imports from the US have also risen 439,000 bpd in June, a big jump from 280,000 bpd purchased in the previous month.

Hence, if conflict deepens or any even any short-term disruption in Hormuz arises then the share of Russian barrels will also rise.

In such a scenario, India may also look to diversify further by turning to suppliers like the United States, Nigeria, Angola and Brazil—though these alternatives would come with higher freight costs.

Oil Minister Hardeep Singh Puri, speaking on 13 June, assured that India has sufficient energy reserves to meet domestic demand in the coming months. Furthermore, India can also release oil from its strategic reserves (covering 9-10 days of imports) to bridge any shortfall.

[With inputs from PTI]