India’s Modi reaches out to Iran as energy crunch fears grip the South

Indian Prime Minister Narendra Modi called Iranian President Masoud Pezeshkian within hours of Tehran’s new supreme leader vowing to keep the Strait of Hormuz closed, as New Delhi scrambles to mitigate energy supply risks.

That was Modi’s first call to Iran since the war broke out, as the world’s third-largest importer of oil and second-largest consumer of liquefied petroleum gas grapples with rising energy costs and panic-buying amid tightening supplies due to the closure of the critical waterway.

India has relied on supplies from the Strait of Hormuz to meet about 50% of its crude oil needs, as per Citi, while importing most of its LPG — the primary cooking fuel used by commercial establishments as well as households — through this route.

“The safety and security of Indian nationals, along with the need for unhindered transit of goods and energy, remain India’s top priorities,” Modi said in a post on X, sharing details of his conversation with Iran’s leadership.

While petrol pumps have “adequate stocks,” there is panic-buying of LPG, which is leading to supply constraints, government officials said in a press conference on Thursday.

The government has even directed pollution control boards to allow the use of fuels such as kerosene, biomass, and coal by the hospitality sector, as the world’s most populous country prioritizes LPG supply to households.

Nearly 330 million households and over 3 million businesses in India use LPG cylinders. Many restaurants are closing or have curtailed their menu due to the shortage of LPG cylinders available for commercial use, according to a statement by the National Restaurant Association of India shared with CNBC.  

“India needs more oil and gas,” said Nikhil Bhandari of Goldman Sachs, on CNBC’s “Squawk Box Asia,” adding that the country is highly dependent on supplies from the Strait of Hormuz and has a “much lower” inventory cushion than other north Asian markets.

Global brokerage Nomura, meanwhile, raised India’s consumer inflation forecast to 4.5% from 3.8% for the financial year ending March 2027, saying that the crunch in commercial LPG risks pushing up prices charged by restaurants.

India is facing rising energy costs and shortages, which could lead to “multiple sources of inflationary pressure,” if…