In the midst of rising geopolitical tensions in West Asia and the Strait of Hormuz crisis, there have been supply-side challenges for global energy markets, and these have implications for India. Experts from S&P Global Energy have highlighted that declining crude supplies, rising LNG costs, and rising shipping and chemical supply chain issues have created a complex risk scenario. The dependence of India on West Asia for crude oil, LNG, and LPG supplies makes it imperative for India to strategically reassess its energy landscape.
High stress on crude oil supplies:
As Pulkit Agarwal, Head of India Content, S&P Global Energy, states, “Global energy markets are currently under severe stress owing to ongoing conflict in the Middle East and the Closure of the Strait of Hormuz, which remains the key energy artery to the world. The Strait is responsible for supplying about 17 million barrels per day or thereabouts of crude oil to the markets, without which the global oil markets have come under severe strain.
The refining systems have always been attuned to an efficient supply chain for crude oil, and hence there is a huge dislocation of what the buyer wants at a particular time versus what and where the seller is supplying from, i.e., crude oil. The issues faced by the oil market have always been two-fold: a physical shortage of crude oil quantities at the right place, of the right quality, at the right time, and the geopolitical risks it poses for the future of supply chain.”
Impact on refined products and LPG:
This is reflected in the Refined Products and LPG market, as India is a significant supplier of Jet Fuel, Gasoil, and Naphtha to global markets, and it holds a significant share of the Asian LPG market. India’s geographical location is such that it is closely linked to the Arab Gulf, and hence, the flow of energy from this region is critical for meeting India’s energy demands. Disruptions in these supplies require immediate attention to alternative sources, which is always a complex and risky affair. S&P Global reports that before the closure of the Strait of Hormuz, 50-55 percent of India’s crude imports were being transported through this route.
In response, there is a trend of diversification of crude oil, including more Atlantic Basin and Russian crudes, although this makes voyages longer and freight costs higher. Furthermore, India is heavily dependent on LPG imports from the Middle East, and finding alternative LPG is difficult. Hence, there is a focus on demand management, production maximization, energy source diversification, and diplomatic means to sustain energy supplies.
Supply vulnerabilities faced by India regarding LNG:
“India gets almost 50 percent of its total natural gas requirements from LNG imports, out of which almost 60 percent of these imports come through the Strait of Hormuz. Just for context, S&P Global Data shows that in April 2025, 21 cargoes from Qatar and UAE were delivered to India. This is what this finding implies: there is a huge shortfall of LNG that India must make up for to meet its total natural gas requirements,” said Suyash Pande, Senior Analyst LNG Pricing, S&P Global Energy.
The global LNG market has been given a major shock that has led to a near doubling of spot prices as Asian consumers are rushing to secure supplies. This has led to a search for alternative supplies from Oman, Africa, and the US. India is facing a challenge in terms of competition from other global consumers. However, it has been observed that sellers are studying arbitrage economics to ensure maximum gains. Although West Africa arbitrage to India is a positive factor, the increase in prices of US cargoes going east of Suez has a direct correlation to Northeast Asia’s prompt periods. Also, the logistics of loading cargo are a factor in procurement that sometimes leads to a rise in premiums.
Rahul Kapoor, Global Head, Shipping and Metals, S&P Global Energy, said: “The escalation in the Middle East certainly puts the key oil chokepoint, the Strait of Hormuz, squarely at the centre of global geopolitics. Shipping and the energy markets are signalling that a prolonged disruption risk is undoubtedly significantly higher than at any point in decades.”
These recent trends in energy markets have been termed a black swan event. Oil tankers have been identified as a weak link in the global oil supply chain that lacks the capability to adapt to geopolitical conflicts like strikes or closure of shipping lanes. They are entirely dependent on government intervention to ensure safe passage.
Impact on Petrochemicals:
According to Stuti Chawla, Associate Director for Chemicals Pricing Middle East and India, S&P Global Energy “Since the start of the Middle East conflict, the prices of key petrochemicals assessed by Platts have gone up by around 31-67 percent in India. The upside risk remains as upstream supply remains constrained. The Indian petrochemical industry is facing a triple whammy: Imports from the Middle East have completely stopped; imports from Far East and Southeast Asia have drastically reduced as many producers in these locations have announced Force Majeure due to feedstock shortages; and local producers have reduced petrochemicals to focus on LPG.”
The demand is declining in India, resulting in shutdowns in downstream plants due to a lack of feedstock. This disruption in petrochemicals can affect industries like packaging, automotives, paints, white goods, and pharmaceuticals in the near future.
