India is facing an LPG supply shock as 90% of imports pass through the Strait of Hormuz. The disruption is forcing cooking gas rationing and driving a 100,000 barrel-per-day demand drop for 2026. While the government accelerates the switch to piped natural gas, domestic diesel and gasoline demand remains resilient, distinguishing India from the global energy slowdown.
India’s energy supply chain is facing a major disruption following the closure of the Strait of Hormuz. Because nearly 90% of India’s liquefied petroleum gas (LPG) imports pass through this critical shipping route, the blockade has triggered a supply shock. Consequently, the government has been forced to implement rationing measures for cooking fuel. Estimates suggest this supply bottleneck will lead to a decline in domestic LPG demand by 100,000 barrels per day (b/d) throughout 2026.
The recovery from this disruption is expected to be slow, even with anticipated demand spikes during the festival season. A key factor behind this sluggish rebound is a structural change in how Indian households consume energy. The government is accelerating the rollout of piped natural gas (PNG) connections. By moving urban households toward city gas distribution networks, the demand for traditional LPG may not return to pre-disruption levels even after supplies stabilize. This shift suggests a permanent change in the energy mix for many Indian consumers, which acts as a structural headwind for LPG volume growth.
While the LPG segment faces volume pressure, the broader Indian fuel market remains an outlier compared to global trends. In many parts of the world, high costs and conservation efforts have caused demand for transportation fuels like diesel and gasoline to fall significantly. However, Indian demand for these fuels is showing resilience. Diesel consumption is projected to grow by 90,000 b/d, and gasoline demand is expected to rise by 60,000 b/d. This strength is supported by robust domestic economic activity and the fact that retail prices in India have not fully reflected the sharp spikes seen in international markets, which has shielded the average consumer.
For investors, these trends present a mixed outlook for energy companies. Oil marketing companies, which manage LPG distribution, face the risk of volume loss and the logistical complexity of managing supply shortages. Conversely, the forced acceleration of PNG connectivity provides a long-term tailwind for city gas distribution companies, which stand to gain as more households move away from LPG cylinders to piped gas. The primary risks for investors to monitor include the duration of the Strait of Hormuz closure, the impact on import costs, and any changes to government subsidy policies on fuel pricing. Tracking how quickly companies can expand their PNG networks and whether OMCs can protect their profit margins despite these volume challenges will be essential in the coming quarters.