How the US–Israel–Iran conflict shattered India's fragile energy balance — and what it means for the world's fastest-growing major economy.
Long before the first US–Israeli airstrike hit Tehran on the night of February 28, 2026, India was already living on borrowed time. The world's third-largest oil consumer and fourth-largest refiner had spent decades building an economy powered almost entirely by imported fossil fuels — and nowhere was that dependence more acute than in the Persian Gulf.
Coal remains the backbone of India's domestic energy supply at 48% of total national consumption, but oil — the lifeblood of transport, agriculture, and industry — tells a starker story: 89% of India's national oil requirements are met through imports. In 2025, India imported roughly 5 million barrels per day, making it one of the world's largest buyers of crude. About 60% of that came from the Middle East.
"India faces the most acute near-term exposure of any major economy — dual physical and financial shock from a Hormuz-driven crude spike."
— Go Katayama, Principal Insight Analyst, KplerSource: Kpler ship-tracking data, March 2026. Russia's share fell from 36% in March 2025 to 20% by Feb 2026 as India responded to US pressure.
Between 2022 and 2025, India quietly became one of Russia's most important energy customers. Following Western sanctions on Moscow after the Ukraine invasion, Indian refiners snapped up deeply discounted Russian crude — Russia's share of India's oil imports surged from just 1% in 2017 to 36% by early 2025. India refined and re-exported petroleum products globally, becoming the "world's refinery" — a role that earned hard currency while keeping domestic fuel costs low.
The arrangement angered Washington. In August 2025, President Trump signed an executive order imposing secondary tariffs on India — raising total tariffs to 50% — explicitly targeting New Delhi's continued purchase of Russian crude. Following an interim trade deal, India agreed to stop buying Russian oil and to source more energy from the United States. By February 2026, Russia's share had plummeted to just 20% of India's crude intake, while the Gulf's share surged to 51%.
"It's bad timing for India. India's oil purchases will be under the microscope if it buys additional Russian cargo."
— Ellen Wald, President, Transversal Consulting, on CNBC, March 2, 2026Then, on February 28, 2026, the US and Israel struck Iran. Traffic through the Strait of Hormuz — the waterway now carrying more than half of India's crude — collapsed by over 85% within days. India found itself over-exposed to the very supply route it had pivoted toward to appease Washington, with Russian oil now politically off-limits — and millions of barrels of cheap Russian crude sitting idle in Asia's waters.
The Strait of Hormuz — 33 kilometres wide at its narrowest, with a shipping lane just 3 kilometres in each direction — is the single most consequential waterway in the global energy system. In 2024, approximately 20 million barrels of oil transited it daily, representing about 20% of all global oil consumed. For India, it is not merely important — it is existential.
Following US–Israeli strikes that reportedly killed Iran's supreme leader, Iran's Revolutionary Guard declared the strait "closed" and set ablaze the prospect of a total blockade. At least five tankers were damaged, two crew members killed, and roughly 150 ships stranded in Gulf waters. Kpler's tracking data showed eastbound exits collapsing from 21–22 million barrels on February 27–28 to just 2.8 million barrels on March 1 — an 87% reduction in two days.
Qatar's Ras Laffan LNG complex — supplying 53% of India's LNG and representing 19% of global LNG supply — halted production on March 2 after a drone attack from Iran struck its facilities. War-risk insurance premiums spiked to six-year highs. Brent crude surged from $73 on Friday, February 28, to above $82 by March 2.
Source: Kpler vessel tracking. As of March 3–4, 2026.
Every $10/barrel rise adds $13–14 billion to India's annual import bill. Brent has already climbed ~$12/barrel in 2026. Food, transport, and medicine prices will follow.
80–85% of India's cooking gas comes from the Gulf. Unlike crude, India has no strategic LPG reserve. Rural households and PM Ujjwala beneficiaries face direct impact.
A $10/barrel sustained rise widens India's current account deficit by 40–50 basis points. Rupee depreciates. Foreign portfolio investment has already been declining.
Ras Laffan's shutdown threatens gas-fired power plants. India imports 50% of its LNG. However, coal — now declining — can partially substitute in the short term.
India is trapped: Washington forbids Russian oil, yet Gulf oil is now disrupted. The US–India trade deal hangs in the balance. Any Russian pivot risks renewed tariffs.
Nearly 10 million Indians live in the Gulf. Remittances — vital to rural Indian households — could fall sharply if Gulf economies are destabilised by a prolonged war.
India holds 74 days of combined crude reserves. Officials say there is no immediate physical shortage. The bigger risk is price, not volume — for now.
India's 226 GW of renewable capacity now provides ~22% of power generation, reducing (but not eliminating) fossil fuel dependency for electricity.
India expanded crude suppliers from 27 to 40 in 2025 (adding Argentina, among others). West African and Latin American alternatives exist, but carry 4–6x longer transit times.
The most likely base case, according to several analysts. A brief, contained conflict followed by a US-brokered ceasefire restores Hormuz traffic and brings Brent back below $80. India's reserves prove sufficient; economic damage is limited to temporary price shocks.
If fighting extends, India faces severe economic pressure. Reserves are drawn down. India almost certainly returns to Russian crude — risking US tariff renewal. Fuel inflation bites hard; the rupee depreciates significantly. India's energy transition ambitions are shelved.
The tail risk: Saudi, UAE, or Kuwaiti energy infrastructure is targeted. The Bab el-Mandeb is also disrupted. India faces a genuine supply crisis — not merely a price one. This scenario would be unprecedented in modern economic history and would test every assumption about Indian energy security.
India's government has moved swiftly on multiple fronts since the conflict erupted. The Ministry of Petroleum established a 24×7 control room to monitor supply and stock positions. Commerce Minister Piyush Goyal convened an emergency inter-ministerial supply chain meeting. PM Modi personally called the leaders of Oman, Kuwait, and Qatar to coordinate and express solidarity.
On oil strategy, state refiners have been given emergency latitude to seek alternative supply globally. Officials are simultaneously lobbying the foreign affairs ministry to seek a formal waiver from Washington to resume Russian crude purchases — citing force majeure conditions. Russian oil is already available on the water near major Asian hubs; logistics are well-established.
India's medium-term energy strategy — aggressive investment in solar (now 110 GW installed, up 39× since 2014), wind, and green hydrogen — provides some insulation for the power sector. But transport, cooking, and industry remain overwhelmingly dependent on oil and gas, and no amount of solar panels can fill that gap in the short run.
"We are prepared and continuously look out for suitable sources but will have to brace for supply and price challenges in the short term."
— G Krishnakumar, Indian State Oil Official, March 2026