The elimination of Iran’s key top leaders in a joint US-Israel offensive and fears that blockade of the Strait of Hormuz will continue in the short term threatens to push up India’s oil and gas import bill, which was more than $144 billion in FY25.

Indian government and refiners are reviewing the deteriorating geopolitical scenario in West Asia, particularly the uncertainty arising out of the killing of Iran’s supreme leader Ayatollah Ali Khamenei.

“It’s a fluid scenario. We are in touch with refiners, Foreign & Commerce Ministries and Prime Minister’s Office. We are told vessels carrying crude, LNG, fertilisers, etc are not entering the Strait (Hormuz) but lining up in the Persian Gulf. More clarity will come once an interim government is in place in Tehran,” a senior government official said.

An official with a refiner explained that import bill will rise as logistics and war premium is going up. Protection and Indemnity (P&I) club is notifying clients that liability cover will become expensive due to additional protection (AP).

Navigating blockade

“Diversification is there, but it comes at a cost. A comparatively cheaper alternative could be Russian crude at sea. We expect Brent to now surge and on Monday it can easily breach the $80 per barrel mark. The next 3-4 days will give a better view of the situation in West Asia and the fate of the blockage of Hormuz,” he added.

Global real time data and analysis provider Kpler’s tracking indicates continued availability of Russian cargoes in the Indian Ocean and Arabian Sea region, including volumes in floating storage.

JM financial in a note said “Brent has already moved to a 7-month high of around $72.8 a barrel, and scenario analysis suggests that Hormuz disruption could push prices above $90, while a broader regional conflict could take crude beyond $100. For India, the impact is direct—every $1 rise in crude increases the annual import bill by around $2 billion, putting pressure on the trade balance.”

Painting a similar scenario, V K Vijayakumar, Chief Investment Strategist at Geojit Investments pointed out that the near-term impact will be negative.

“Crude has spiked and if the crude price remains high for an extended period of time, our balance of trade and balance of payments will be impacted since we import around 85 per cent of our oil requirements. OPEC Plus will scale up production and try to stabilise prices,” he added.

If the strait of Hormuz is closed (there are unconfirmed reports of this), crude price can spike further. Trump may forcefully reopen this. But that requires boots on the ground which will escalate tensions further, Vijayakumar emphasised.

Sumit Ritolia, Kpler’s Lead Research Analyst for Refining & Modeling said that roughly 2.5–2.7 million barrels per day (mb/d) of India’s crude imports transit Hormuz, largely from Iraq, Saudi Arabia, UAE and Kuwait.

“Over the past 2-3 months, India’s dependence on Middle Eastern barrels has increased as refiners pivoted away from a portion of Russian volumes. As a result, the relative weight of Gulf-origin crude in India’s import basket has risen, increasing short-term sensitivity to any disruption in Hormuz transit,” he added.

Prashant Vasisht Co-Group Head Corporate Ratings at ICRA, said that any attack on oil and gas production facilities of other major Middle East producers would further aggravate supply concerns.

The bigger vulnerability, pointed out by Ritolia, is LPG. India imports around 80–85 per cent of its LPG needs, with the majority sourced from Gulf suppliers—almost entirely transiting Hormuz. Unlike crude, India does not maintain strategic LPG reserves of comparable scale, making LPG flows more logistically sensitive in a disruption scenario.

Inflation fears

JM Financial noted that nearly 20 per cent of global oil flows through the Strait of Hormuz and over 40 per cent of India’s crude imports transit this route, creating material exposure.

“While media reports indicate disruption to shipping activity in the Strait, confirmation of a complete and sustained closure remains unclear, making the probability and duration of supply interruption the key variable,” the brokerage added.

Prolonged tensions may increase logistics and marine insurance costs, disrupt Gulf shipping routes and pressure the trade balance.

“Indian Rupee faces near-term depreciation bias, with potential RBI intervention through FX reserves. The transmission channel is clear: higher crude increases inflation risk; higher inflation pushes bond yields up; rising yields compress equity multiples,” JM Financial said.

Aditi Nayar, Chief Economist at ICRA, said “The situation in West Asia is unfolding and the extent that it prolongs and widens, would have a bearing on India’s macros, including things like the impact of fuel prices on inflation and the twin deficits, as well remittances.”

Published on March 1, 2026

Indian equity markets are bracing for heightened volatility as escalating tensions in the Middle East push crude oil prices higher and revive concerns over inflation, trade balances and fiscal stability.

Brokerage JM Financial said the coordinated US–Israel strikes on Iran mark a sharp escalation in regional hostilities, significantly raising the risk of supply disruptions. The brokerage noted that Brent crude has already climbed to multi-month highs and warned that any sustained disruption in shipping activity through the Strait of Hormuz could drive prices well beyond current levels.

Nearly 20 per cent of global oil flows and over 40 per cent of India’s crude imports pass through the Strait of Hormuz, making it a key vulnerability for the domestic economy. JM Financial said that every $1 per barrel increase in crude prices could raise India’s annual import bill by roughly $2 billion. While upstream oil and defence companies may see relative support, sectors such as oil marketing companies, paints, aviation and chemicals could come under pressure from higher input costs. The brokerage added that the sustainability of Brent above $80 per barrel and the duration of any supply disruption would be critical variables for Indian equities.

Dr. V K Vijayakumar, Chief Investment Strategist at Geojit Investments Limited, echoed concerns over the immediate fallout. “The near-term impact will be negative. Crude has spiked and if the crude price remains high for an extended period of time, our balance of trade and balance of payments will be impacted since we import around 85 per cent of our oil requirements. OPEC Plus will scale up production and try to stabilise prices. If the strait of Hormuz is closed (there are unconfirmed reports of this), the crude price can spike further. Trump may forcefully reopen this. But that requires boots on the ground which will escalate tensions further, he added.

On the medium-term outlook, Vijayakumar said, “Medium-term impact on the market will depend on how long the conflict lasts. We don’t know the answer to this question. After crippling Iran, US and Israel may make a strategic withdrawal. The market will react very negatively. In a weak market, upstream oil companies and defence stocks will do well.”

Market participants expect a gap-down opening if tensions intensify further, with risk-off sentiment dominating trade. Investors will closely track crude price movements, developments around shipping routes in the Gulf region and any signals of de-escalation, as these factors are likely to dictate the trajectory of Indian equities in the near term.

Published on March 1, 2026