India draws up contingency plans as Gulf tensions spike oil prices

Three people aware of the developments said India is exploring alternative supply routes, expanding its supplier network, and building up its domestic reserves to ensure energy security.

Risks escalated last week after Iran partially restricted movement through the Strait of Hormuz—a critical pass-through point for global crude oil and liquefied natural gas supplies.

For India, which imports 90% of its crude requirements, roughly 1.5-2 million barrels of the country’s daily oil import of 5.5 million barrels comes through this narrow passage from countries like Saudi Arabia, Iraq, Kuwait and the UAE.

“The contingency for ensuring energy security involves securing crude oil supplies through two pipelines specifically built to bypass the Strait of Hormuz, tapping Abu Dhabi National Oil Company (Adnoc) and Saudi Arabian Oil Co’s (Saudi Aramco’s) global reserves and portfolios for replacement barrels,” one of the people cited above said, requesting anonymity.

The two pipelines—the Adnoc-operated 360-km Habshan-Fujairah strategic oil pipeline with a 1.5 million barrels per day (mbpd) capacity that opens to the Gulf of Oman; and the Saudi Aramco-operated 1,200-km east-west crude oil pipeline with a 5 mbpd capacity that offers access to the Red Sea—may be tapped in case the Strait of Hormuz comes to a closure.

The plan was initially explored after the 10-day war last year involving Iran, Israel and the US, the first person added.

Kirit Parikh, former member (energy) of federal think-tank Niti Aayog, said that if the Strait of Hormuz is blocked, the major concern would be how long such a blockade would last.

“India would certainly have stocks available for a few days, but if the blockade lasts for a longer period, then it would affect not just the buyers of oil and Iran, but also other suppliers in West Asia who use this strait to export their produce,” Parikh said. “Hopefully we (can) get more from the UAE and Saudi Arabia through alternate routes like the pipelines, and from other countries.”

Notably, Iranian media had reported—citing the Islamic Revolutionary Guard Corps Navy—that the navy is prepared to shut down the Strait of Hormuz if ordered by the country’s senior leadership. Iran has reportedly already undertaken large-scale naval exercises in the Persian Gulf and the Strait of Hormuz last week.

Queries emailed to the Union ministry of petroleum and natural gas, Indian Oil Corp Ltd, Bharat Petroleum Corp Ltd, Hindustan Petroleum Corp Ltd, Adnoc and Saudi Aramco remained unanswered till press time.

Madan Sabnavis, chief economist at Bank of Baroda, said a conflict in West Asia could impact supplies, raise prices, and affect India’s current account deficit.

“As long as prices are in the range of $70-80 per barrel, it should not be a major concern for India as most supplies are based on forward contracts. But as prices near the $80-per-barrel mark and eventually cross that level, it would raise concerns. Further, a war-like situation would also lift freight rates and thereby increase the landed cost of oil,” Sabnavis said.

Spreading the net

The second person cited earlier said India is also making efforts to replenish its strategic petroleum reserves or SPRs, which currently store about 10 days of inventory. These strategic reserves combined with the oil stored in the storage facilities of the oil marketing companies account for nearly 75 days of stock.

Alongside, the country is also expanding its network of oil suppliers as it faces US strictures on oil imports from Russia, which had become its biggest oil supplier in recent years. Imports from Russia have shrunk from a high of 2 million barrels per day in August 2025 after sanctions were imposed on Rosneft and LUKOIL, two of Russia’s largest oil suppliers.

The US has also claimed that India has committed to halt Russian oil imports in the interim trade deal framework between the two countries. Although India has not announced any plan to stop energy imports from Russia, supplies have significantly declined of late.

Mint reported earlier that in February, Saudi Arabia has emerged as the top supplier of oil to India at 1.13 million barrels of oil per day (mbpd) supplied as of 10 February, compared to 1.09 million bpd by Russia.

A public sector refiner said, requesting anonymity, that the efforts to source oil from newer geographies including Africa and Latin America—even in smaller quantities—would go a long way in ensuring continuous availability of energy.

Experts said diversification to other sources including Brazil, Colombia, Nigeria and Guyana is necessary as the supplies through the pipelines—of Adnoc and Saudi Aramco—would not be able to make up for the overall imports of India through the Strait of Hormuz.

“The pipelines may account for a fraction of the total volumes which pass through the strait,” said Prashant Vasisht, senior vice president and co-group head, corporate ratings, Icra Ltd. “The Strait of Hormuz is key to the global energy market as it supplies about 20% of the world’s petroleum liquid consumption.”

Vasisht noted that an upheaval in West Asia is likely to have a greater impact on the oil market than what was witnessed post reports of India curtailing Russian oil imports.

In the past three sessions, oil prices have surged nearly 7% to cross $70 per barrel amid the military build-up by the US near Iran. On Friday, Brent closed at $71.16 per barrel on the Intercontinental Exchange.

An increase of about $1 per barrel may increase India’s oil import bill by ₹13,000 crore. In FY25, India imported oil worth $167 billion. During the April-January period of the ongoing fiscal (FY26), India imported crude worth $100 billion, according to data from the Petroleum Planning and Analysis Cell (PPAC).

Building reserve capacity

Meanwhile, work to strengthen India’s oil reserves is ongoing. The country’s current reserve capacity is 5.3 million tonnes, but only 3.6 million tonnes were stored in its underground caverns as of October 2024, according to a report by a parliamentary standing committee.

The SPRs, located in Mangaluru, Padur and Visakhapatnam, combined with commercial oil stocks held by refiners and marketers, plus crude that has been booked and is being shipped, account for an estimated 70–75 days of crude inventory.

It, however, falls short of the International Energy Agency’s 90-day benchmark, required for full IEA membership. India had formally applied for its membership in 2023 and the IEA recently said that talks are underway for India’s full membership of the organization.

Work is already underway for construction of more reserves. Mint earlier reported that multiple energy and engineering giants, including Indian Oil Corp., Trafigura, Vitol, and Larsen & Toubro Ltd have shown interest in developing a 4 million tonne strategic crude reserve at Chandikhol, Odisha. The project is part of the second phase of ISPRL (Indian Strategic Petroleum Reserve Ltd).