The ships stopped moving on a Tuesday morning. By Wednesday afternoon, the trading floors in London and New York had already priced in the panic. Brent crude, which was trading comfortably below $90 just days earlier, crossed $96.50 per barrel — a jump of over 6% in less than 48 hours. The trigger behind this was; blockade of the Strait of Hormuz, the narrow waterway between Iran and Oman through which roughly 20% of the world's traded oil passes every single day.
For energy traders, this was a crisis waiting to happen. For ordinary Indians buying petrol at the pump, it is about to become a very real problem.
The Strait That Controls the World's Energy Pulse
To understand why a chokepoint barely 33 kilometres wide at its narrowest can shake global markets, you need to look at the numbers. According to the U.S. Energy Information Administration, approximately 17 to 21 million barrels of oil flow through the Strait of Hormuz daily. That accounts for roughly one-fifth of total global petroleum liquids consumption. On any given day, between 15 and 20 large tankers pass through that corridor.
The countries that depend on this route include Saudi Arabia, Iraq, the UAE, Kuwait, Bahrain, and Qatar — essentially the entire Gulf producer bloc. When that route gets blocked, even partially, the market does not wait for confirmation of supply disruption. It prices in the risk immediately.
That is exactly what happened this week.
Also Read: 20% of the World's Oil Was Blocked This Week — the Biggest Energy Shock Since 1973
India's Exposure: More Vulnerable Than Most
India imports over 85% of its crude oil requirements. In the fiscal year 2023-24, the country's crude oil import bill crossed $132 billion. With oil now above $96, that bill is going to look significantly heavier in the months ahead — assuming prices stay elevated.
The arithmetic is straightforward and uncomfortable. Every $10 increase in crude prices adds approximately $12 to $15 billion to India's annual import bill. A sustained move from, say, $85 to $96 means the country is looking at an additional $13 to $15 billion in outflows — money that widens the current account deficit, pressures the rupee, and drains forex reserves.
As of mid-April 2026, India's foreign exchange reserves stood at approximately $680 billion. That provides significant buffer, but reserves are not infinite, and a prolonged oil price spike would test the RBI's management of the rupee.
The Petroleum Planning and Analysis Cell, under the Ministry of Petroleum, has not yet issued a formal statement on the impact assessment. But sources within the ministry indicated that a review meeting was held on the import strategy, particularly around India's agreements with Russian suppliers — from whom India has been buying discounted crude since 2022.
The Russia angle matters here. India has diversified its oil import basket significantly in the past three years. Russia now accounts for close to 40% of India's crude imports. Russian oil does not travel through Hormuz. That is one buffer. But it is not enough to fully insulate India, because the global benchmark price — Brent — still sets the floor for all negotiations.
Also Read: Absorbing the Shock Due to WAR: What India’s Latest Fuel Tax Cut Really Signals
Petrol, Diesel, and the Political Arithmetic
Here is where the story gets domestically complicated.
Petrol and diesel retail prices in India are theoretically linked to international crude benchmarks, but the government has consistently used taxes and subsidies to manage what consumers actually pay. Before every state election, prices tend to stay frozen. After elections, revisions happen. Right now, the political calendar matters.
The central government collects excise duty on petrol and diesel. State governments add VAT on top. Together, taxes often account for 50-55% of what the consumer pays at the pump. This means there is theoretical room to absorb some global price increase without passing it to consumers — but only for a limited time.
If Brent remains near $96 or climbs higher, the oil marketing companies — Indian Oil, Bharat Petroleum, and Hindustan Petroleum — will start bleeding. These are largely government-owned companies. Their under-recoveries (losses per litre sold below cost) will start showing up in quarterly results by June.
In 2022, when oil crossed $120 post the Russia-Ukraine war, the government held retail prices firm for months, then eventually raised them — causing significant political backlash. That playbook may be revisited.
"The government will hold for as long as it can," said a former senior official in the Ministry of Petroleum, speaking on background. "But you can only absorb so much before the fiscal math stops working."
Inflation: The Invisible Tax on Everyone
The second-order effect of high crude prices is inflation — and in India, this is felt unevenly.
Diesel is the fuel of transportation. When diesel becomes expensive, trucking costs go up. When trucking costs go up, every vegetable, every bag of wheat, every carton of packaged goods becomes marginally more expensive. For urban middle-class consumers, this shows up as a nudge in the grocery bill. For rural households on fixed or agricultural incomes, it is a genuine squeeze.
The RBI's Monetary Policy Committee meets next in June. If inflation expectations start rising because of sustained fuel price pressure, the committee's job gets harder. Rate cuts — which the market was beginning to anticipate — could be pushed back.
India's retail inflation has been broadly under control in early 2026. A crude price shock of this nature, if sustained beyond six to eight weeks, would begin showing up in CPI readings by May-June.
The Geopolitical Layer
The Hormuz blockade is not happening in a vacuum. The Middle East has been under geopolitical pressure for months. Any blockade — whether by state actors, non-state groups, or naval standoffs — carries escalation risk.
The Indian government has deep interests in Gulf stability. Over 9 million Indian workers live and work in the Gulf region. Remittances from the Gulf to India run to approximately $40 billion annually. A destabilised Gulf means disrupted livelihoods for millions of Indian families — particularly from Kerala, Uttar Pradesh, Rajasthan, and Tamil Nadu.
India has historically maintained careful diplomatic neutrality in Middle East conflicts. The Ministry of External Affairs will be watching the situation closely. If the blockade is linked to a specific state actor, India's diplomatic balancing act becomes even more delicate.
The International Energy Agency has not yet convened an emergency meeting, but a coordinated release from strategic petroleum reserves — similar to what happened in 2022 — is being discussed informally among major consumer nations.
India maintains a Strategic Petroleum Reserve of approximately 5.33 million metric tonnes across facilities in Visakhapatnam, Mangaluru, and Padur. At current consumption levels, this covers roughly 9 to 10 days of the country's crude requirements. Not a long runway, but a real one.
What Happens Next
The oil market's next move depends on three things: how long the blockade lasts, whether major producers announce compensatory supply increases, and whether the U.S. or other naval forces intervene to restore passage.
Saudi Arabia and the UAE together have spare production capacity of roughly 2 to 3 million barrels per day. If they signal willingness to pump more and route it through alternative paths — the East-West pipeline in Saudi Arabia, for example — markets may calm down. But none of that happens overnight.
For India, the next 30 days will be watched carefully by the Finance Ministry, the RBI, and the oil ministry. The core questions are simple:
- How long does Brent stay above $95?
- Do Russia-supplied volumes remain unaffected and sufficient?
- Can the government hold retail prices stable through May without bankrupting OMCs?
- Does the rupee stay under 85 to the dollar, or does it slip further?
There are no easy answers. But the decisions made in the next two weeks will have consequences that ordinary Indians feel for the rest of the year.
The tankers may start moving again tomorrow. Or they may not. Either way, the pump price clock has started ticking.