Whalesbook
The escalating conflict around the Strait of Hormuz has forced India to aggressively reroute its crude oil supply chains, securing additional supplies from the United States, Russia, and West Africa to ensure uninterrupted fuel imports. Industry officials confirmed that refineries have put planned maintenance on hold and are operating at normal processing rates, actively building reserves to meet domestic demand.
India relies on imports for roughly 88% of its crude oil, with approximately half of its February supplies typically passing through the Strait of Hormuz, a critical chokepoint between Iran and Oman. Recent military strikes by the US and Israel on Iran, coupled with Tehran's retaliatory actions, have significantly heightened regional tensions, disrupting tanker movements through this strategic waterway.
Strategic Diversification Efforts
Senior oil ministry officials stated that non-strait sources, which accounted for 60% of supplies last year, have now climbed to 70%. Indian refiners are increasingly sourcing crude from West Africa, Latin America, and the US. Furthermore, the US Treasury issued a 30-day waiver, valid until April 5, permitting the delivery of sanctioned Russian crude already loaded onto vessels bound for India, provided they were loaded on or before March 5.
Significant volumes of Russian crude are currently in transit, with industry sources indicating 120 million barrels on the water. Major players like Reliance Industries, Hindustan Petroleum Corporation Ltd, and HPCL-Mittal Energy Ltd have resumed purchases of Russian crude. Despite past fluctuations, India's Russian crude imports in February 2026 averaged around 1.04 million barrels per day.
Comfortable Inventory Levels Amidst Rising Costs
Officials maintain a confident stance on energy security, reporting combined crude and finished product inventories sufficient for approximately 50 days of demand. India's Strategic Petroleum Reserves add about 9.5 days of coverage, and state-run companies hold stocks for an additional 64.5 days, totaling around 74 days of net import coverage.
However, analysts caution that while physical supply diversification is achievable, the overall cost of imports is likely to rise. This is attributed to higher international crude prices, which surged above $92 per barrel following recent geopolitical events, coupled with extended shipping routes, increased freight charges, and elevated insurance premiums. LNG prices have also more than doubled. These higher import costs could potentially widen India’s fiscal deficit or translate into increased fuel prices for consumers, with analysts estimating that every $10 rise in crude prices could add 20-25 basis points to the consumer price index if fully passed on.
The situation underscores India's vulnerability to geopolitical shocks in its primary energy supply routes and the complex balancing act between ensuring energy security and managing economic stability.