Could India’s oil bill become costlier because of a new proposal from US President Donald Trump?
Trump has announced that the United States will act as the “guardian” of the Strait of Hormuz and charge
a 20 per cent toll on cargo ships using one of the world’s busiest energy routes. While the proposal is still short on details and faces legal questions, it has raised concerns for countries like India that depend heavily on the strategic waterway for oil imports.
Here’s what it could mean for your fuel bill and the Indian economy.
Why Is The Strait Of Hormuz So Important?
The Strait of Hormuz is a narrow sea passage between Iran and Oman that connects the Persian Gulf to the Arabian Sea.
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Nearly one-fifth of the world’s crude oil and a substantial share of liquefied natural gas (LNG) pass through this route every day. For India, it is one of the most critical energy lifelines, as a large portion of its crude oil imports from countries such as Saudi Arabia, Iraq, the UAE and Kuwait transit through the strait.
Any disruption, or an added cost, on this route has the potential to affect India’s import bill.
What Has Trump Announced?
Trump said the US would ensure the Strait of Hormuz remains open and that ships using the route would pay a 20 per cent charge to cover the cost of American security operations.
He described the US as the waterway’s “guardian” and said countries benefiting from safe passage should help pay for it.
The announcement came just hours after the UAE accused Iran of targeting two of its tankers, Mombasa and Al Bahiyah, with cruise missiles in the southern shipping lane of the Strait of Hormuz, within Omani territorial waters. One Indian crew member was killed in the attack, while eight others were injured, including six Indians and two Ukrainians. Four of the injured remain in critical condition.
How Did Iran React?
Taking to X, Iran’s foreign minister Abbas Araghchi took a dig at Trump, sarcastically agreeing that whoever secures the waterway should be compensated, while calling 20 percent “too much”.
POTUS is absolutely right. Whoever provides secure and safe passage of commercial vessels through the Strait of Hormuz should be compensated for this service.
Iran has always been the GUARDIAN of the Strait and will remain so FOREVER.
20% is of course too much. We will be fair
— Seyed Abbas Araghchi (@araghchi) July 13, 2026
Meanwhile, speaking to Reuters, a spokesperson for the International Maritime Organization, the UN’s shipping regulator, said there is no legal basis for imposing mandatory tolls on transit through an international strait.
What Does It Mean For India?
For India, the concern is not just Trump’s proposed 20 per cent cargo charge.
The bigger issue is that it comes after months of attacks on commercial vessels and oil tankers in and around the Strait of Hormuz, forcing ships to alter routes, pushing up insurance premiums and increasing freight costs. Oil prices have already reacted sharply to the renewed tensions, with markets pricing in the risk of further disruption to one of the world’s most important energy corridors.
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India imports more than 85 per cent of its crude oil, and a substantial portion of those imports from Iraq, Saudi Arabia, the UAE, Kuwait and Qatar pass through the Strait of Hormuz. The waterway is also a critical route for LNG imports. Any prolonged disruption, whether because of military action, tanker attacks or additional transit costs, can increase India’s import bill, apart from uncertainty over not directly paying a toll.
If enforced, a 20 per cent surcharge will raise landed costs for Indian refiners and could eventually feed into domestic fuel prices.
Economists say the immediate impact may not come from the proposed levy itself but from its knock-on effects. If shipping companies face higher insurance costs, war-risk premiums or freight charges, those costs could eventually be reflected in the price of crude. A sustained rise in global oil prices would, in turn, put pressure on India’s trade deficit, inflation and fuel prices.
This is also why the government has, over the past few years, diversified its crude basket by increasing purchases from Russia and other suppliers. However, diversification reduces, and not eliminates, India’s exposure because the Gulf remains one of its largest sources of energy imports.
