Disruptions around the Strait of Hormuz could pose significant risks to India’s energy security, particularly LPG supplies, according to a report by PL Capital.
According to the report, disruptions around the Strait are likely to impact refined petroleum products more severely than crude oil.
“The ongoing disruption around the Strait of Hormuz is expected to create a much more severe imbalance in refined product markets than in crude oil markets,” it said.
The report highlighted that damage to refining infrastructure and logistical challenges could tighten the supply of products such as diesel, gasoline, LPG and jet fuel.
“Refinery outages, infrastructure damage, and logistical constraints will likely cause a prolonged shortage of refined products such as diesel, gasoline, LPG, and jet fuel,” the report added.
The report said the global oil market is vulnerable to supply shocks due to the strategic importance of the Strait of Hormuz, through which a large portion of global oil trade passes.
“Iran’s influence over the Strait of Hormuz is often viewed as ‘nuclear-level leverage’, given that the chokepoint carries roughly ~20 per cent of global oil flows,” the report noted.
For India, the risk is particularly high due to its dependence on energy imports from the Middle East.
“India is particularly vulnerable to the current disruption due to its dependence on Middle Eastern LPG. 50-60 per cent of India’s LPG imports transit via the Strait of Hormuz,” the report said.
The report further warned that disruptions to these flows could create a supply crunch in the domestic LPG market.
“With import flows disrupted, India is facing a severe LPG supply crunch, which is politically sensitive given the high share of household consumption,” it said.
It added that India’s crude oil reserves provide only a limited cushion in case of a prolonged disruption.
“India has around ~160 million barrels of crude storage, translating to roughly 15-20 days of buffer,” the report noted.
The report also highlighted that supply alternatives may be limited due to logistical constraints and security risks in other shipping routes.
“Flows through the Red Sea and Suez Canal are increasing but remain constrained due to narrow logistics capacity and continued security risks,” it said.
According to the report, even if the situation improves, restoring normal fuel supply flows could take longer because refining infrastructure typically takes more time to restart.
“Refining recovery will likely take significantly longer… only after domestic markets stabilise can export flows normalise, suggesting a prolonged recovery period for global product markets,” it added.
