As conflict between the United States, Israel, and Iran intensifies, the Strait of Hormuz – the world's most critical energy chokepoint – has emerged as the focal point of a growing geopolitical and economic crisis. This article examines how disruptions in the Persian Gulf threaten global oil and gas supplies, destabilize international shipping networks, and threatens a wider regional conflict extending to the Red Sea. Focusing on India, one of the world's largest energy importers, the analysis explores the far-reaching consequences for energy security, trade, inflation, economic growth, and strategic interests.
The ongoing United States-Israel military campaign against Iran that started on 28 February and is now in its fourth month (dubbed as Operation Epic Fury by the US and Operation Roaring Lion by Israel) has transformed the world’s most critical maritime chokepoint, the Strait of Hormuz, into active theatre of major disruption with significant economic fallout. What began as targeted strikes has escalated into a de facto blockade of key energy arteries in the Persian Gulf, with profound domino effects on global oil and gas markets, shipping routes and lanes, and national energy security grids worldwide.
Current Geopolitical Context
The current conflict over Iran escalated sharply after US and Israeli struck various Iranian civil and military targets across provinces beginning on 28 February 2026, which also resulted in the killing of Ayatollah Ali Khamenei, Iran’s Supreme Leader and other important leaders in the military hierarchy. Iranian retaliation has included missile and drone barrages on Israel, adjoining Gulf states including US bases in those countries, and commercial shipping vessels. Iran’s Islamic Revolutionary Guard Corps (IRGC) including its naval unit have struck multiple cargo vessels, and have laid mines in and near the Strait of Hormuz. The US President Donald Trump has publicly claimed the US has achieved major war objectives but will “finish the job” as long as it takes while the International Energy Agency (IEA) took the unprecedented step of asking its member countries in unlocking the 400-million-barrel strategic reserve. Price of Brent crude oil have surged past $100 per barrel in major world markets in recent weeks.
Iran has explicitly vowed to prevent “even one litre of oil” from transiting the Strait of Hormuz for the benefit of the US and its allies, while selectively permitting passage for certain neutral or friendly flagged vessels such as China. At the same time, Iran’s President, Masoud Pezeshkian, has outlined three conditions for ending the war viz. recognition of Tehran’s legitimate rights, war reparations, and firm international guarantees against future aggression. It remains to be seen how US and Israel respond to these Iranian demands as the negotiations remained seem to be going nowhere with Israel initiating a latest round of strikes against Hezbollah in Lebanon thereby putting the US-Iran ceasefire in jeopardy.
Geostrategic Significance of the Strait of Hormuz
The Strait of Hormuz is one of the world’s most important and widely utilized shipping routes and is considered as a major oil transit choke point. Bounded to the north by Iran, and to the south by Oman and the United Arab Emirates, it is 21-mile-wide (at its narrowest) and 31 miles wide at its entrance, connecting the Persian Gulf to the Arabian Sea. It carries approximately 20 per cent of global seaborne oil trade and 20 per cent of LNG exports — roughly 16–17 million barrels of oil and oil products per day. According to 2025 estimate by the US Energy Administration, nearly $600 billion worth of energy originates from Persian Gulf annually. Over 3,000 ships transit through the Hormuz Strait each month with the waterway deep enough for the smooth sailing of world’s biggest crude oil tankers.
While alternative routes are available to bypass the Strait of Hormuz for assured supply of oil, such as Saudi Arabia’s 1,200-km East-West Pipeline with the capacity of 7 million barrels a day and the United Arab Emirates’ pipeline infrastructure with a capacity of over 1.7 million barrels a day connecting its inland oil fields to the port of Fujairah on the Gulf of Oman, their combined capacity is inadequate to fully compensate for the current disruption in the crude oil shipments through the Strait. Consequently, when operated at the global oil markets are experiencing a supply deficit of approximately 8–10 million barrels per day.
A possible doble whammy through Bab al-Mandab
If the pro-Iran Yemeni Houthi militants choose to disrupt Bab al-Mandab chokepoint on the Red Sea, it may create further complications and ripple effects in the supply chain networks for major countries of the world. Bab al Mandab is a crucial 30-km wide maritime choke point connecting the Red Sea to the Gulf of Aden and the Indian Ocean. Approximately 12 per cent of global oil passes through this strait and with over 20,000 vessels and 1.6 billion tons of cargo. Located between Yemen on the Arabian Peninsula and Djibouti/Eritrea in Africa, it serves as a vital artery for global trade including oil. If the Iranian crisis persists much longer and draws Houthis into the active conflict, shipping vessels will be forced to take longer routes around the Cape of Good Hope, thus causing huge disruption of global supply-chains with exorbitantly higher operational costs for the recipient countries. As such, a simultaneous shutdown of both Hormuz Strait and Bab al-Mandab may culminate an unprecedented “double chokepoint” which could cripple global economy.
Global Implications
With crude oil hitting over the $100 a barrel mark; with potential for $200 a barrel if closure and the war prolong, LNG and fertilizer prices spiking to 40 per cent in some Asian markets, the global markets are currently undergoing immense volatility and fluidity. Longer voyages by ships have added extra 10–14 days and millions in fuel costs per vessel. Insurance and freight rates including by the Lloyds have equally soared despite the US offering a war risk insurance package worth $20 billion. Food security is also affected significantly as Gulf fertilizer and urea exports account for 35 per cent of global needs. From a geopolitical perspective, wider involvement of pro-Iran groups such as Hezbollah and Houthis has already exacerbated the already tenuous situation causing global tumult.
Implications for India
India is among the most exposed major economies with a heavy dependence on Persian Gulf oil and gas supplies among other things. Approximately 50 per cent of its crude oil imports (2.5–2.7 million barrels/day), 68 per cent of LNG (Liquefied Natural Gas), and over 85 per cent of LPG (Liquefied Petroleum Gas) usually transit the Strait of Hormuz. Any disruption significantly impacts India’s economic growth particularly in areas such as fertilizer production, power generation, household and commercial fuel availability. In terms of energy security, existing floating stocks and enroute cargoes may provide 40–45 days of cushion. With domestic petrol/diesel and cooking gas prices already inflated and with Brent crude price topping $100 a barrel and Iran threating to be prepared for even $200 a barrel if the war continues; its impact is likely to be reflected in transport and manufacturing costs. Higher import bills may widen the trade deficit with corporate margins in manufacturing, supply chains, delivery, logistics, and exports already under pressure.
Remittances from the Indian diaspora and migrants residing in Gulf countries (over nine million workers) could see a sharp decline if regional economies shrink. In civil aviation sector operated by Indian carriers, some long-haul airline routes affected by airspace restrictions and fuel costs may also be severely impacted. Overall, India which is poised for a strong growth with projected GDP to grow by 7.4 per cent to 7.6 per cent in the 2025-26 fiscal year might suffer a setback in expanding its economy to over $5 trillion by 2027 and be the third-largest economy by 2030.
On its part, India has pursued diplomatic path very vigorously. India has secured a notable concession as Iran initially allowed several Indian-flagged tankers, Shivalik Nanda and Devi, safe passage through the Hormuz Strait after several one-on-one engagement by External Affairs Minister S. Jaishankar with his Iran counterpart, Abbas Araghchi. Since then, several other Indian-flagged vessels including Piramal and Pushpak have safely transited the waterway. This reflects New Delhi’s seriousness in keeping all its channel of communications open.
The Trump Administration’s waiver to India to buy Russian oil may be a short-term solution as well. This is because New Delhi’s emergency crude oil under its Strategic Petroleum Reserve is likely to sustain for about 10 days and may last up to 74 days by using total national storage capacities including commercial ones stored in Visakhapatnam, Mangaluru and Padur.
In addition, Iran is a crucial linchpin of India’s outreach to Central Asia which includes its heavy investment in Chabahar port, shared security interests in ensuring regional stability and in nourishing the historical, cultural and civilizational linkages. Iran’s North-South Trasport Corridor is also of interest to India as it will provide a strategic balance via-a-vis China’s BRI (Belt and Road Initiative).
Forward Outlook
The Iranian crisis in general and the uncertainty over safe passage of naval vessels in the Strait of Hormuz are unlikely to resolve quickly in the absence of a final deal arrived at through sustained diplomacy and through the proactive involvement of a credible multilateral body such as the United Nations. The longer the Iranian crisis lasts, there is potential for other countries and stakeholders of jumping into the bandwagon and hence further muddling the geopolitical, geoeconomic and geostrategic challenges.
Prof. Dr. Mohammed Badrul Alam is Formerly, Director of Research; Professor and Head, Department of Political Science, Faculty of Social Sciences, Retd; Jamia Millia Islamia University, New Delhi. The views expressed here are his own.
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