Hormuz supply shock: India diversifies oil basket as Middle East conflict drags on

As the Middle East conflict continues to escalate, India is rerouting its crude supply chains to secure uninterrupted fuel imports. Indian refiners are securing additional crude oil from the United States, Russia, and West Africa to maintain adequate supplies if the Middle East conflict stretches on for long, industry officials and analysts said. Refineries that convert crude into petrol, diesel and other fuels, have put their planned maintenance on a hold and are operating at normal processing rates, building reserves to meet short-term demand to ensure domestic fuel needs are met. India’s oil basket relies on imports for around 88% of its crude, with roughly half of February’s supplies passing through the Strait of Hormuz, a narrow but vital sea route between Iran and Oman. The recent military strikes by the US and Israel on Iran, coupled with Tehran’s retaliatory attacks on US bases in neighbouring countries and Israel, have sharply raised regional tensions, effectively halting tanker movement through the strategic strait. “Non-strait sources are fully operational and we are sourcing more and more supplies from non-conflict zones,” a senior oil ministry official said. adding that non-Strait sources, which accounted for 60% of supplies last year, climbed to 70% after the Middle East conflict.

Diversifying oil basket – Russia, West Africa and more

Indian refiners are increasingly sourcing crude from West Africa, Latin America, and the US. The US Treasury recently issued a 30-day waiver allowing delivery of sanctioned Russian crude already loaded onto vessels bound for India. The waiver, valid until April 5, permits the sale, delivery, or discharge of Russian-origin crude loaded on or before 5 March, including vessels under certain sanctions.Inflows from Russia Industry sources said 120 million barrels of Russian crude are currently on the water, with 15 million barrels near India in the Arabian Sea and Bay of Bengal, and another 7 million barrels near Singapore. Reliance Industries, Hindustan Petroleum Corporation Ltd, and HPCL-Mittal Energy Ltd have resumed purchases of Russian crude after halting imports following US sanctions on major producers Rosneft and Lukoil last year. Before sanctions were imposed in October 2025, Reliance Industries was the largest Russian crude buyer, importing more than 500,000 barrels per day under a long-term agreement with Rosneft. The Oil ministry official noted that India never fully stopped importing Russian crude, bringing in around 1.04 million barrels per day in February 2026, down from 1.6–1.8 million bpd in 2023–2025. “We are in a very comfortable position as far as crude and finished products are concerned,” he said, adding that India’s combined inventory can meet demand for 50 days. Onshore storage currently holds about 144 million barrels, enough for roughly 30 days at 2025 import levels, and supplies are constantly replenished. India’s Strategic Petroleum Reserves provide around 9.5 days of net import coverage, while state-run companies hold crude and product stocks covering 64.5 days. Together, total storage capacity equates to roughly 74 days of net imports. While India is physically able to secure crude from alternative sources, analysts warned that costs could rise due to higher prices, longer shipping routes, increased freight, and elevated insurance premiums. International crude prices surged above $92 per barrel, up from around $70, after the US and Israel struck Iran on 28 February. LNG prices have more than doubled, reaching $24–25 per million British thermal units.

India’s import bill Higher import costs could widen India’s fiscal deficit or translate into price increases for consumers. Every $10 rise in crude prices may add 20–25 basis points to the consumer price index if passed on, analysts said. India, the world’s third-largest crude importer, depends on the Middle East for roughly half of its imports. In February 2026, India received 2.8 million bpd from Iraq, Saudi Arabia, the UAE, Kuwait, and Qatar, accounting for 53% of total imports, while global flows through the Strait of Hormuz were around 15 million bpd of crude and 5 million bpd of oil products in 2025. Exposure to the Hormuz route was around 41 per cent in 2025 but has risen recently as Indian refiners reduced Russian crude purchases. Imports from Russia averaged 1.15 million bpd in the first two months of 2026, compared with approximately 1.7 million bpd in 2025.