When the Iran-Israel-US war began in early March 2026 and Iran effectively closed the Strait of Hormuz, India — one of the world's most oil-dependent economies — found itself facing an energy crisis it was not fully prepared for. Since then, crude oil prices have surged from $69 per barrel to over $113 per barrel, the Indian rupee has hit a record low of nearly ₹94 per US dollar, and LPG cylinder prices have jumped by ₹60.
Key Points
Strait of Hormuz closed since March 1, 2026 — cutting off 20 percent of world's seaborne crude and LNG. India imports 90 percent of crude oil and nearly half its LPG from this region. Indian rupee hit record low of ₹93.94 per US dollar. LPG cylinder prices rose ₹60; petrol hiked ₹3 per litre + 90 paise. US issued India a 30-day emergency waiver to buy stranded Russian oil (March 6, 2026). India's GDP growth forecast cut — Goldman Sachs warned of slower growth and higher inflation.
Background
India imports about 40 percent of its crude oil from West Asia and over 80 percent of its natural gas from the same region. The Strait of Hormuz — the narrow waterway between Iran and Oman — is the world's most critical oil transit route. When Iran effectively closed it in early March 2026 following military strikes, global energy markets were thrown into chaos.
Main Details
Within days of the Strait closure, crude prices crossed $100 per barrel. By mid-May 2026, they were hovering between $110 and $120 per barrel. India's oil import bill — which was already $174.9 billion in the financial year ended March 2026 — is on course to rise dramatically in FY2027. Qatar supplies 50 percent of India's LNG. With supply halted, fertiliser plants and power grids have been operating at only 70 percent of their requirement.
Reactions
Former Indian ambassador Nirupama Rao told CNBC that while she did not believe an immediate economic shock was imminent, India faces "difficult times ahead" unless there is peace in West Asia. Common Indians are already feeling it — higher fuel prices, more expensive cooking gas, rising food prices, and a weaker rupee making imported goods costlier.
Impact Analysis
Every sector of India's economy is affected: Agriculture faces higher diesel costs; manufacturing faces rising input costs; aviation faces higher fuel costs; the middle class faces household budgets squeezed from multiple directions simultaneously.
What Happens Next
Everything depends on how long the Iran war lasts. A swift resolution could bring oil prices back to $70–80 per barrel. A prolonged conflict could push India's GDP growth below 6 percent in FY2027 from over 7 percent projected earlier.
Q: Why is the Iran war affecting India so much?
A: India imports 90 percent of its crude oil and gets most of its LNG from West Asia. The Strait of Hormuz closure has choked supply.
Q: How much has the rupee fallen?
A: The rupee hit ₹93.94 per US dollar — a record low — as India's import bill surged.
Q: Is India's cooking gas supply affected?
A: Yes. LPG prices rose ₹60 per cylinder. India gets over 91 percent of its LPG from the Gulf.
Q: What is India doing to manage the crisis?
A: India used emergency US waivers to buy Russian oil, cut certain taxes, and PM Modi appealed to citizens to reduce fuel use and gold imports.
Q: Will India go into recession?
A: Economists say recession is unlikely, but growth will slow significantly if the war continues beyond mid-2026.