West Asia War: Impact on India’s Energy Sector: Sairakshit Raghupathy

West Asia War: Impact on India’s Energy Sector
Sairakshit Raghupathy

India the world’s third largest consumer of crude oil which relies heavily on imports to meet its energy needs, with nearly 87% of its consumption coming from abroad. As tensions and conflict in West Asia intensify, this dependence puts India in a particularly vulnerable position. The country’s reliance on a single region for crude oil remains a key energy security risk despite diversification.While reliance on the Gulf has decreased from 72% to 63%, and the supply base has grown to over 40 nations, West Asia continues to dominate imports, and refinery reliance on its crude limit’s full diversification.The Strait of Hormuz is critical in this regard since it supplies 20 million barrels per day of oil, 80% of which is consumed in Asia, with China, India, Japan, and South Korea accounting for approximately 65%. With the prolonged conflict, the Strait of Hormuz is India's most serious vulnerability.

To understand why war in West Asia sends alarm bells through India’s economy one must first look at the scale of India’s energy dependence. India is not a peripheral player in global energy markets; in 2023 it was the world’s third largest consumer of petroleum and other liquids. Unlike many large economies, however India produces relatively little of its own oil. while recent analysis notes that India’s crude and condensate production fell to 604,00 barrels per day in 2023, the lowest since 1993. The import of crude is also expected to keep growing, as India will account for more than one third of global oil demand growth between 2023 and 2030 as its economy expands and energy needs rise.Official Indian data show that domestic crude oil production was higher in the early 2010’s and has since moved onto a declining path.

When the conflict erupts in Wet Asia, the consequences for India are swift and measurable. The ongoing war in the region has already sent crude prices surging with Brent crossing $100 per barrel from around $65 per barrel before hostilities began. For a country that imports 90% of its crude oil, this is not a distant problem it’s an immediate fiscal one. Every $10 per barrel rise in average crude prices adds $13 – $14 billion to India’s net oil import bill and widens he current account deficit by 0.3% of GDP. The Houthi attacks on Red Sea shipping routes beginning in late 2023 offered an early warning of how quickly West Asian instability translates into supply chain disruption. Around 95% of cargo ships from India were forced to reroute through the Cape of Good Hope, adding over 3,500 nautical miles and nearby two weeks of additional sailing time per voyage.

The rupee has borne much of this pressure. State Bank of India (SBI) Research estimates that every $10 per barrel increase in crude raises inflation by 35 – 40 basis points and could slow GDP growth to around 6% if prices sustain at $120 – $130 per barrel.A wider current account deficit puts sustained downward pressure on the rupee feeding imported inflation back into the domestic economy and leaving the Reserve Bank of India with increasingly limited room to manoeuvre.

The impact of the war can be witnessed in India as study indicates that the oil price shocks in India shows that international oil price transmission works through import, price and fiscal channels which is why energy shocks often spill over into broader inflationary measures. The Reserve Bank of India has pointed out that when fuel prices rise, they don’t just affect energy costs, they also push up food prices and other everyday expenses, making inflation harder to control over time. At the same time, higher oil prices put pressure on Government finances. When the government tries to protect consumers by cutting taxes, offering subsidies or delaying price hikes, the financial burden often shifts to the public budget, which can increase fiscal deficits and strain overall revenues.

At this moment the most visible strategies have been the diversification of crude oil imports. Official Government information released in March 2026 states that India now imports crude from round 40 countries compared with a much narrower supplier base earlier and adds that about 70% of crude imports now come from routes outside the Strait of Hormuz, showing a clear effort to reduce concentration risk. Over the past few years New Delhi’s sourcing network has expanded further through larger purchases from Russia while earlier diversification also brought in more supplies from the USA and Africa as this shift shows how India widened its supplier mix to improve flexibility during geopolitical uncertainty.

Current trends suggest that prolonged instability in the West Asia will push India further toward diversification, diplomacy and domestic transition. Recent research on India’s energy security challenge argues that for an import dependent country, reducing reliance on a narrow set of suppliers is no longer just an economic choice but a strategic necessity, especially in a volatile geopolitical environment. This also indicates that energy security will increasingly shape foreign policy as India deepens ties with a wider network of producers and partners to protect supply lines and reduce external risk.

India’s energy future reflects a shift from vulnerability to strategic adaptation. While West Asia will remain an important source of crude oil, India’s heavy import dependence exposes it to geopolitical risks, making diversification and resilience central to its long-term strategy. Growing energy demand and reliance on external suppliers further reinforce the need for a more secure and flexible energy system.

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Disclaimer : Mr. Sairakshit Raghupathy is a Research Officer at the Deccan Centre for International Relations. The views expressed are those of the author and do not reflect the views of the Deccan Centre for International Relations.