U.S. Hormuz blockade hits India just as Russian oil purchase waiver

India, even as it tilts towards the U.S., is increasingly finding that Washington’s policies work to its detriment, particularly in matters of energy security. The Iran war has only exacerbated the issue.

On Monday, the U.S. began blocking ships from entering or exiting Iranian ports via the Strait of Hormuz — one of the world’s most critical oil chokepoints — in a bid to pressure Tehran after peace negotiations collapsed.

Experts said the move dealt a blow to New Delhi, which had just imported its first Iranian oil shipment in seven years as it scrambled to meet energy needs amid the Iran war. Compounding the strain, a U.S. waiver allowing countries to buy Russian crude expired on April 11, removing another key source of energy supply as global markets remain tight.

Mukesh Sahdev, chief oil analyst at energy intelligence firm XAnalysts, told CNBC that India is facing a mounting supply squeeze “with the loss of Iranian barrels, plus not getting the Russian barrels.”

India imports more than 85% of its crude oil requirements — around 5.5 million barrels per day — making it the world’s third-largest oil importer. According to Sahdev, the country has already lost about 3 million barrels per day of crude that previously transited through the Strait of Hormuz, forcing refiners to scramble for alternative supplies, particularly from Russia.

India is in a far more fragile position if disruptions to its crude supply persist, Sahdev said, adding that, unlike China — which holds around 300 days’ worth of oil reserves — India has reserves of roughly 160 million barrels, representing only a limited buffer of around 30 days against prolonged supply shocks.

While fuel pumps are not running dry, the impact of the Middle East conflict is already visible in key macroeconomic indicators. Last month, HSBC’s flash Purchasing Managers’ Index showed that India’s private sector activity in March slowed to its lowest level since October 2022 due to softer domestic demand.

Companies surveyed cited the Middle East conflict, unstable market conditions, and intensifying inflationary pressures as factors weighing on growth. A few days later, India’s finance ministry also issued a warning that its growth forecast of 7.0%–7.4% for the financial year ending March 2027 faces “considerable downside” risk due to rising energy costs and supply chain disruptions linked to the Iran war.