The World’s Two Most Critical Waterways
The Strait of Hormuz, connecting the Persian Gulf to the Arabian Sea, is the single most important oil chokepoint on the planet. Before the current geopolitical flare-ups, it handled roughly 21 million barrels of oil per day, equivalent to about 20% of global
daily consumption and a quarter of all seaborne oil trade. A significant portion of this is destined for Asia, including major importers like India, China, Japan, and South Korea. The Bab el-Mandeb Strait, positioned between Yemen and the Horn of Africa, is the gateway to the Red Sea and the Suez Canal. Prior to recent instability, it saw over 9 million barrels per day. Together, these two chokepoints form a critical corridor for energy flowing from the Middle East to the rest of the world. Any disruption, even a minor one, sends immediate ripples through energy markets.
Anatomy of a 'Double Choke' Scenario
The scenario that has analysts worried is a 'double choke' — simultaneous disruptions at both Hormuz and Bab el-Mandeb. This is not just a theoretical exercise. Recent events have shown how fragile both points are. Ongoing conflicts in the Middle East have seen oil flows through the Strait of Hormuz plummet from over 21 million barrels per day to under 5 million in the second quarter of 2026. At the same time, attacks on shipping in the Red Sea have caused traffic through the Bab el-Mandeb to fall by more than half from its 2023 peak. A coordinated or coincidental shutdown of both straits would effectively paralyze a massive portion of the world's energy transport. Tankers would be forced to take much longer and costlier routes, such as circumnavigating the entire continent of Africa, adding weeks to delivery times and sending shipping and insurance costs soaring.
How Disruption Leads to $135 Oil
The math behind a price spike to the $130–$135 range is based on a severe supply shock. According to an analysis by CareEdge Ratings, simultaneous disruptions at both chokepoints could push Brent crude prices into this upper bracket. The logic is straightforward: if millions of barrels of oil are abruptly taken off the market each day, it creates a massive deficit that the world’s remaining production cannot immediately fill. This triggers a panic in the market as countries and companies scramble to secure the available supply, bidding prices up dramatically. This forecast is echoed by other financial institutions. Analysts at Citigroup previously projected a price of $130 per barrel in a negative scenario where Hormuz disruptions persist for several weeks. Similarly, Goldman Sachs has noted that a peak price of $135 is possible in a risk scenario involving very low flows for an extended period. These figures represent a market in crisis, where the sheer lack of available oil, rather than fundamental demand, dictates the price.
The Impact on India’s Economy
For India, which imports over 80% of its crude oil needs, such a price surge would be devastating. As a major consumer of oil shipped through the Strait of Hormuz, the country is directly exposed to any volatility. A sustained period of Brent crude at $130-$135 would inflate India's import bill, putting immense pressure on the current account deficit and weakening the rupee. These macroeconomic effects would quickly filter down to everyday life. The government and state-run fuel retailers, unable to absorb such high costs indefinitely, would be forced to raise prices for petrol and diesel. This, in turn, increases transportation costs for everything from food to consumer goods, feeding into broader inflation and impacting household budgets across the nation.
Are There Any Safety Valves?
The world is not entirely without defences against such a shock. Major oil-consuming nations, including the United States, China, and India, maintain Strategic Petroleum Reserves (SPRs) that can be released to temporarily cushion the market. However, these reserves are finite and designed to be a short-term bridge, not a long-term solution. Some limited alternatives for transport exist. Saudi Arabia and the UAE operate pipelines that can bypass the Strait of Hormuz, but their capacity is a fraction of the volume that typically transits the strait and may already be in use. The primary alternative route for ships is to avoid both chokepoints by sailing around the Cape of Good Hope, but this adds significant time and fuel costs to each journey, which ultimately gets passed on to the consumer. While these measures can soften the blow, they cannot fully compensate for the loss of the world’s two most vital energy arteries.
