The Hormuz and Malacca Lifelines
Much of modern global trade travels by sea, and for an energy-hungry nation like India, this reliance is acute. The country's energy security is heavily dependent on two critical maritime chokepoints. The first is the Strait of Hormuz, a narrow channel
separating the Persian Gulf from the wider ocean. A staggering portion of India’s energy imports, including crude oil, LNG, and LPG, travels through this waterway. Historically, around 40-50% of India's crude oil imports and an even higher share of its gas have transited Hormuz, primarily from suppliers like Iraq, Saudi Arabia, and the UAE. The second chokepoint is the Strait of Malacca, linking the Indian Ocean to the South China Sea. This 900-kilometre-long passage is a primary artery for global trade, carrying about a quarter of the world's traded goods each year. Any disruption here would not only affect energy supplies from further east but also India's own trade with East and Southeast Asia.
Geopolitical Flashpoints and Price Shocks
Unfortunately, both these straits are located in regions of significant geopolitical tension. The Strait of Hormuz has been at the center of a protracted conflict in the Middle East since early 2026, leading to severe disruptions in shipping. Iran's attempts to control passage and the subsequent naval blockades have sharply reduced traffic, creating what the International Energy Agency has called the largest supply disruption in history. Meanwhile, the South China Sea, which the Strait of Malacca opens into, is a theatre of competing territorial claims and growing military presence, raising concerns about the long-term stability of this route. Analysts warn that a simultaneous disruption at both chokepoints could send Brent crude prices soaring to the $130-$135 per barrel range. Such a price shock would have severe consequences for India, which imports over 85% of its crude oil.
The Economic Domino Effect
A sustained oil price of $130-$135 a barrel would hit the Indian economy hard. The most immediate effect would be a ballooning import bill, which would widen the country's current account deficit and put downward pressure on the rupee. S&P Global Ratings estimated that such a price spike could slow India's GDP growth by up to 80 basis points. For businesses, higher energy costs would compress corporate earnings, potentially by 15-25%, and increase debt burdens. For the average citizen, it would mean higher prices at the petrol pump and for LPG cylinders used for cooking, fuelling inflation across the board. With India's LPG import dependence being particularly high—and a vast majority of it coming via Hormuz—this vulnerability is especially pronounced.
Building a Resilience Strategy
The government is acutely aware of these risks and is pursuing a multi-pronged strategy to enhance India's energy resilience. One key pillar is the Strategic Petroleum Reserve (SPR). India has established underground rock caverns with a capacity of 5.33 million metric tonnes, which can cover about 9.5 days of national crude oil requirements. Plans are underway to expand this capacity significantly under Phase-II and beyond, with new facilities planned in states like Odisha, Madhya Pradesh, and Rajasthan. Beyond storage, diversification is crucial. India has been actively diversifying its sources of crude oil to reduce dependence on the Middle East. This 'all-of-the-above' strategy also includes a major push for renewable energy—solar, wind, and green hydrogen—to reduce long-term reliance on fossil fuels. Schemes to promote rooftop solar and solar-powered agricultural pumps are designed to bring generation closer to consumers, strengthening the grid and reducing dependence on imported fuels.
