As US readies ground forces in West Asia, India’s ‘stable’ energy claims face a slippery reality

The war in West Asia is nearly a month old, and this morning, there’s news of the United States beginning to deploy airborne troops and Marine units into the region after Iran rejected a ceasefire proposal. This move expands the scope of military action beyond air and naval engagement. These are not mere symbolic developments. These are ground-capable forces positioned for rapid response in a conflict that shows no signs of slowing, and the US seems to be running out of options.

This week in Parliament, Prime Minister Narendra Modi acknowledged the gravity of the situation. Calling the crisis “worrisome,” he warned that its effects would be felt “for a long time,” urging preparedness on the scale of the Covid period. At the same time, the official position remained composed: fuel supplies are stable, shipping routes are under watch, and contingency mechanisms are in place.

Set against this, the statement from the Executive Director of the International Energy Agency (IEA), Fatih Birol, has offered a more structural reading. Speaking at the National Press Club of Australia in Canberra, he outlined that more than 40 energy facilities across nine countries are severely damaged. The effective closure of the Strait of Hormuz had reduced global oil supplies by about 11 million barrels per day, which is more than double the combined shortfalls of the 1970s’ crises. The attacks on gas facilities have led to a simultaneous contraction of liquefied natural gas (LNG) markets by around 140 billion cubic metres.

As Birol put it, “This crisis, as things stand, is now two oil crises and one gas crash put all together.” In other words, this energy crisis is no longer about what may happen, which is terrible indeed if it comes to pass, but it is also about what has already begun.

Even so, a limited opening has begun to emerge. Earlier today, Iran’s foreign minister, Seyed Abbas Araghchi, announced that vessels from five ‘friendly countries’ – India, China, Pakistan, Iraq, and Russia – would be allowed to use the passage through the Strait of Hormuz. The concession may ease immediate pressure on select routes, but it does little to restore the broader system through which the energy supplies move.

An inflexible system

The strain on the energy supply is not simply a matter of volume, but of structure. Many assume that oil, being global, will simply find another route when one is obstructed. The reality is much more complex.

However, crude oil is not a uniform commodity. The medium and sour-grade crudes that move out of Saudi Arabia, Iraq, and Kuwait are distinct from the lighter crudes priced on Brent or West Texas Intermediate. Oil refineries are calibrated to process a specific type of crude, and refineries across Asia, including India, are calibrated to process these specific grades. When supply through the Gulf is disrupted, substitution can’t be immediate. It requires locating comparable crude, often sourced from Oman, Kazakhstan, or Algeria, at a premium rate.

That premium is already visible. While Brent has hovered near $100 per barrel, Oman crude has surged to $150, at times reaching record levels above $170. These prices are not anomalies. They reflect a scramble for barrels that can physically replace those lost behind a constrained Strait of Hormuz.

The geography of this disruption is decisive. Nearly 11.2 million barrels per day of crude and 1.4 million barrels per day of refined products typically pass through Hormuz toward Asian markets. India, China, Japan, and South Korea account for the bulk of that demand. When flows tighten, the shortage first concentrates in these countries. Strikes across the Gulf have already forced production cuts across major exporters, with disruptions estimated at over 10 million barrels per day as storage fills and shipments stall.

Even where supply remains available, movement has slowed sharply. A standard voyage from the Gulf to the Indian subcontinent – typically 10 to 15 days – now faces delays, rerouting or outright avoidance. Routes to Europe stretch further, to 25–30 days through the Suez Canal or 35–45 days around the Cape of Good Hope. The system doesn’t really come to a halt; it elongates. This effectively results in the “floating pipeline” becoming longer, and fewer cargoes finish the journey within the same timeframe.

That stretch is now showing up in costs that are hard to ignore. Rates for hiring tankers have surged to nearly $770,000 a day, while the cost of transporting oil has risen by more than $20 per barrel. Insurance premiums for vessels operating in the region have multiplied as much as fourfold. For countries like India, which rely almost entirely on foreign insurers for maritime trade, this adds a layer of vulnerability that will not go away quickly.

At the same time, the system is beginning to fracture contractually. Since the conflict began, at least 17 major force majeure declarations or operational equivalents have been issued across producers, traders, and logistics firms. QatarEnergy has halted output at key LNG trains. Iraq has invoked force majeure on southern crude exports. Kuwait and Bahrain have followed with similar declarations. Shipping giants such as Maersk, MSC and Hapag-Lloyd have invoked voyage-specific force majeure, rerouting cargoes or discharging them at intermediate ports.

This is not a price shock. It is a supply chain interruption being carried out through legal structures.

The strain extends into gas markets, where rigidity is even greater. At Ras Laffan in Qatar, the refinery responsible for roughly 30 percent of global LNG supply, damage from bombings has taken out an estimated 15–17 percent of capacity. Unlike crude, LNG infrastructure can’t be restored quickly. Across the system, these timelines diverge. Shipping disruptions may ease within one to three months, but refineries can take six to eighteen months to stabilise. And upstream infrastructure, which includes gas fields, liquefaction units, and export terminals, has repair timelines measured not in weeks or months but in years. Current estimates suggest a recovery window of three to five years.

Along with this, pressures are building beyond the Gulf. Ukrainian drone strikes have disrupted Russia’s oil export infrastructure, halting an estimated 40 percent of its export capacity, amounting to roughly 2 million barrels per day. Key ports such as Novorossiysk on the Black Sea and Primorsk and Ust-Luga on the Baltic have been hit, alongside sections of the Druzhba pipeline that feed into Europe. Tanker seizures and repeated strikes on pumping stations have further constrained flows.

What this introduces is not a separate disruption, but a compounding one. As routes through Hormuz tighten, alternative supplies from Russia, particularly those bound for Europe and parts of Asia, are facing their own limits. The system is not shifting from one stable source to another; it is experiencing strain across multiple nodes simultaneously.

What appears to be a sharp disruption is actually a layered one beneath. Parts of the system will recover quickly, while others simply cannot.

A familiar shock, but on harder ground

The closest parallel remains the Yom Kippur War and the oil shocks that followed.

In 1973, supply disruptions of roughly 1 million barrels per day, minuscule by today’s scale, were enough to trigger a global economic shift. Oil prices rose from under $3 per barrel to over $20 within months. By 1974, India’s oil import bill had jumped from approximately $414 million to over $1.3 billion, consuming nearly 40 percent of its export earnings.

The consequences extended far beyond the energy markets. Inflation surged, growth slowed, and unemployment rose sharply across developed economies. The images of American citizens lining up for scarce, expensive fuel became famous worldwide, and the adjustments that followed took years, not months.

A subsequent second shock in 1979 worsened the situation, which was already dire. The Iranian revolution and the Iran-Iraq war removed an additional 6–7 million barrels per day from global supply. Oil prices doubled again, rising from around $16 per barrel to over $36. At that moment in history, availability wasn’t the constraint, but affordability was. Economies contracted under the weight of rising energy costs, with developing economies the worst hit.

Set against that history, the present disruption operates on a different scale. Current estimates suggest that around 11 million barrels per day have already been affected, more than double the shortfall during the 1973 crisis alone. At the same time, LNG markets have seen disruptions of around 140 billion cubic metres, introducing a second layer of strain absent in earlier shocks.

The structure of demand has also changed. In the early 1970s, imported oil accounted for about 55 percent of Western Europe’s energy use and nearly 70 percent of Japan’s. Today, energy is embedded across a wider, more interconnected set of sectors, including transport, fertilisers, manufacturing, and logistics. This embeds energy across sectors, making the system less able to absorb shocks without transmitting them.

What the earlier crises demonstrated remains relevant: energy shocks don’t end when supply stabilises. The 1973 embargo was lifted within months, but its economic effects lasted for years. The 1979 disruption unfolded over a longer period, but its consequences extended well into the following decade.

The present disturbance is unfolding within a larger, faster, and less tolerant system. If the earlier crises were enough to trigger global adjustment, this one is operating with fewer buffers and more points of failure.

India’s exposure, and what follows

For India, the exposure is immediate and measurable.

India imports roughly 88 percent of its crude oil, with nearly half of that supply passing through the Strait of Hormuz. Traffic through the strait has fallen by as much as 96 percent, from over a hundred vessels a day to a handful. Supply has not disappeared; it has simply slowed dramatically.

Prices have responded accordingly. Crude has crossed $110 per barrel, rising by over 60 percent in a matter of weeks. But the more consequential effects are already visible downstream.

In the plastics and polymers segment, prices have risen by 68 percent to 78 percent. Production of polypropylene (PP) has dropped by 30–40 percent. In many MSME clusters, such as tile makers in Morbi, Gujarat, over half of the units have already shut down, placing as many as 5 million jobs in the sector at risk. Gas shortages have disrupted operations at India's top metals conglomerate, JSW Group, too, a poor portent for the world’s second-largest crude steel producer.

This pattern repeats across supply chains. In pharmaceuticals, the cost of active pharmaceutical ingredients (APIs) has risen by 20-60 percent, while finished drug prices have already increased by 10–15 percent. Over 70 percent of certain APIs originate in China, creating a layered dependency in which disruptions in energy and logistics ripple through healthcare costs. A country often described as the “pharmacy of the world” is itself exposed to upstream fragility.

Exposure extends even to infrastructure that seems unrelated to energy. Nearly 30 percent of global internet traffic passes through submarine cables routed across the region. Systems such as SEA-ME-WE and FALCON carry a significant share of India’s digital connectivity. With Iran threatening to cut undersea cables, the damage to such infrastructure can take six to twelve months to repair, introducing risks to the IT sector valued at over $270 billion.

Meanwhile, LNG supply remains constrained. With capacity reductions of 15–17 percent at key facilities and repair timelines stretching three to five years, availability is likely to remain tight.

What this reveals is not a single point of strain, but a set of interlinked pressures. Energy feeds into materials, materials into manufacturing, manufacturing into assembly lines, and assembly lines into employment. Right now, households are being shielded, with domestic gas and LPG supplies prioritised while industry absorbs the adjustment. Fertiliser, ceramics, petrochemicals and logistics - sectors where energy forms a large share of operating costs - are already under strain.

Beyond industry, the exposure extends quietly into consumption. Products as varied as packaging, detergents, textiles, footwear, and household goods depend on petrochemical inputs and energy-intensive processes. As input costs rise, these effects tend to surface gradually, though seldom temporarily.

There are buffers. Strategic petroleum reserves are currently about 64 percent full, enough to cover roughly five days of demand. Oil companies hold additional inventories, and import sources have been diversified from 27 to 41 countries. The best-case scenario is that we have reserves for around 90 days; estimates differ. But these measures redistribute dependence; they do not remove it.

The famous utterance of Gandalf from The Lord of the Rings: The Return of the King eerily fits the situation we are in: “Things are now in motion which cannot be undone”. 

This is not a sudden break, but a steady tightening. Energy supply is slower, costs are higher, and certainty is reduced. Energy continues to flow, but under strain. And when the terms of that flow change, the effects tend to travel far beyond the point of origin.

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