Renewed tensions between the United States and Iran near the critical Strait of Hormuz have raised concerns across global energy markets. While India's crude oil supply appears largely resilient due to strategic diversification, experts are cautioning that the nation's imports of Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) face a significantly higher risk of disruption.
According to Sumit Ritolia, who specializes in Modelling Refinery and Oil Markets at Kpler, India's crude import portfolio has become far more robust in recent years. This diversification includes a substantial share of Russian crude, supplemented by barrels from Saudi Arabia and the UAE delivered via bypass infrastructure. Additionally, West African and Latin American grades continue to meet refinery demands, ensuring a broad supply base.
Even with escalating tensions, crude flows through the Strait of Hormuz are largely anticipated to continue, though potential increases in freight and insurance costs could impact prices. However, Ritolia notes that Iranian crude is unlikely to become a significant part of India's supply mix in the near term, primarily due to uncertainties surrounding US sanctions policy, compliance risks, and broader commercial considerations.
LNG and LPG Face Greater Vulnerability
The situation for LNG and LPG markets presents a stark contrast. Ritolia emphasizes that these sectors have fewer short-term substitution options compared to crude oil and remain highly exposed to Gulf supply lines and potential shipping disruptions. A prolonged period of instability in the region could quickly lead to tighter availability, increased freight expenses, and renewed pressure on regional prices, echoing challenges observed in recent months.
For now, India's energy security narrative remains one of successful crude diversification and resilience. The key factors to monitor are the duration of regional tensions, their specific impact on shipping and insurance, and whether LNG and LPG markets begin to experience more pronounced and sustained disruptions.