By K Raveendran
The expanding war around Iran has moved beyond the stage at which India can regard it as a dangerous but geographically contained conflict. The latest military deployments, repeated waves of American strikes and Iran’s threats of larger retaliation point towards a prolonged contest whose economic consequences may ultimately prove more damaging than the battlefield destruction. For New Delhi, the central concern is no longer merely whether crude oil prices rise sharply on a particular day. It is whether the physical availability of oil, gas and shipping capacity begins to shrink faster than governments can compensate.
The Pentagon’s positioning of forces for operations involving more aircraft, longer missions and repeated attacks suggests that Washington is preparing for sustained pressure rather than a limited punitive action. Strikes on Iranian transport links, surveillance facilities and military infrastructure around Bandar Abbas and Chabahar indicate an effort to weaken Tehran’s control over its southern coastline and the Strait of Hormuz. Iran, however, has retained enough missile, drone and maritime capability to threaten tankers, Gulf energy installations and American partners across the region.
That combination creates the conditions for escalation without a decisive outcome. The United States may possess overwhelming air and naval superiority, but Iran does not need to defeat the American military to impose severe global costs. It only needs to keep commercial vessels away from Hormuz, force insurers to withdraw cover, compel tankers to wait outside danger zones and periodically strike infrastructure that supports regional exports. Even a partially obstructed strait can create an economic impact approaching that of a formal closure.
India is particularly exposed because its energy security remains dependent on imported crude. More than four-fifths of the oil consumed by the country is sourced from abroad, while a large share of its liquefied petroleum gas and natural gas requirements also depends on overseas supplies. The Gulf is not simply one among many supplying regions. It is geographically close, commercially established and connected to Indian refineries through routes that are cheaper and faster than many alternatives.
The relative calm in international oil prices since the disruption of Hormuz should therefore not be mistaken for proof that the crisis is manageable. Prices have been restrained partly because governments, refiners and traders have drawn upon inventories accumulated before the conflict. Strategic and commercial stocks have absorbed the initial shock, while slower demand growth in some major economies has prevented panic buying from immediately overwhelming the market.
That protective cushion is now thinning. Oil inventories cannot be released indefinitely, and replenishment becomes difficult when the same supply routes remain under military threat. The most dangerous phase of an energy crisis often begins not when the first shipment is interrupted, but when stored barrels have already been consumed and buyers realise that replacements cannot arrive on schedule. At that point, the market shifts from pricing geopolitical risk to pricing physical scarcity.
Global inventories are being depleted at an unusually rapid pace as refiners continue processing crude while exports from the Gulf remain constrained. Tanker movements through Hormuz have fallen sharply, with periods in which no very large crude carriers or liquefied natural gas vessels complete normal passages. Iraq has already faced disruptions around Basra, and Iran has warned that exports through the strait could be stopped if attacks continue. The possibility that the Bab el-Mandeb route could also face intensified pressure raises the prospect of simultaneous disruption at two of the world’s most important maritime chokepoints.
For India, a prolonged inventory drawdown would transmit pressure through almost every part of the economy. Higher crude costs would enlarge the import bill, weaken the rupee and complicate the Reserve Bank of India’s inflation management. Diesel prices influence freight, farming, construction and public transport. Aviation fuel affects airlines and tourism. LPG shortages or price increases directly burden households and government subsidy programmes. Petrochemicals feed into plastics, textiles, packaging, pharmaceuticals and fertilisers.
The impact would not remain confined to fuel prices. More expensive shipping and insurance would increase the landed cost of commodities even when the oil itself is sourced outside the Gulf. Tankers diverted around longer routes would consume more fuel and remain unavailable for additional voyages, reducing effective global transport capacity. Refineries designed for particular grades of Middle Eastern crude could face operational and financial difficulties if compelled to switch suddenly to alternatives from Russia, Africa or the Americas.
India has greater room for manoeuvre than during earlier oil shocks. Russian crude has diversified the import basket, domestic refining capacity is substantial, and purchasing relationships have expanded across multiple regions. Yet diversification cannot fully compensate for a major Gulf disruption. Russian supplies face their own sanctions, shipping and payment uncertainties. American and Latin American cargoes involve longer journeys. African producers cannot instantly replace millions of barrels lost elsewhere. Every buyer seeking alternatives at the same time would push premiums higher.
The danger to Chabahar adds a strategic dimension extending beyond energy. India’s operated terminal has escaped damage despite an American strike in the port area, but its survival offers little reassurance if the surrounding infrastructure, shipping access or security environment deteriorates. Chabahar was developed to provide India with access to Afghanistan and Central Asia while bypassing Pakistan. It represents years of diplomatic investment and an attempt to build a continental trade route independent of geopolitical constraints imposed by India’s western neighbour.
A war that turns southern Iran into a persistent military zone could render the port commercially unusable even without destroying the Indian terminal. Shipping companies may refuse calls, banks may avoid transactions, insurers may raise premiums and contractors may withdraw personnel. A functioning berth has limited value when roads, railways, communication systems and maritime approaches remain vulnerable to attack. India’s investment could survive physically while losing its strategic purpose.
New Delhi’s immediate requirement is an energy-security posture built for a conflict lasting months rather than weeks. Strategic petroleum reserves must be used carefully, with priority given to preserving supply continuity rather than suppressing every temporary price increase. Refiners need coordinated access to alternative grades, shipping contracts and government-backed insurance arrangements. Fuel pricing policy must distinguish between unavoidable international costs and domestic taxation that amplifies the burden on consumers.
India must also accelerate diplomatic efforts aimed at reopening maritime corridors, protecting civilian energy infrastructure and insulating Chabahar from further attacks. The present war shows that military superiority cannot guarantee secure commerce and that market calm can coexist with a rapidly approaching shortage. Each day of restricted Gulf exports consumes part of the world’s remaining buffer. Once that buffer is exhausted, India will face not merely another episode of expensive oil, but a contest among importing nations for barrels that may no longer be available in sufficient quantities. (IPA Service)
