Manas Dasgupta
NEW DELHI, Mar 2: As tensions in West Asia escalating with the breaking out of the Iran –Israel US war, crude oil prices may see a jump. “Crude oil prices will rise, gold and silver will rise, currencies will depreciate against the dollar, and capital markets worldwide will decline. The reason is simple: uncertainty,” stock market experts said.
This might pose challenges for India’s energy sector in terms of prices and procurement. “Developments in the Middle East could increase pricing and procurement risks for crude oil and liquefied natural gas (LNG), posing substantial challenges for India, which has more than 85% and 50% import dependency, respectively, on these items,” the experts said.
True to the US president Donald Trump’s claims, India continued with its strategy to reduce import of Russian oil and instead was buying more from the Gulf countries with the official data for January showing that share of Russian oil in India’s oil sourcing pool falling to less than 20 per cent for the first time since May, 2022.
However, events over the last week could render this strategy costly for India. A potential trade deal with the U.S. — allegedly the main reason for India reducing cheap Russian oil imports — is in limbo following the U.S. Supreme Court’s February 20 decision striking down that country’s reciprocal tariffs. Further, oil supplies from the Gulf and the U.S. are currently at risk following the conflict with Iran that started on February 28. Oil prices, too, have started rising sharply.
An analysis of the latest preliminary data from the Ministry of Commerce and Industry shows that India imported $1.98 billion worth of crude oil from Russia in January 2026, a share of 19.3%, the lowest in 44 months. Russia’s share was 27.5% two months earlier, and 33% in May 2025.
While the Indian government has maintained that it decides on its energy sourcing based on independent strategic and energy security considerations, the U.S. administration has repeatedly linked the lowering of tariffs on Indian imports and the trade deal with India’s cutting down of oil imports from Russia and increasing them from the U.S.
However, the U.S. Supreme Court has now struck down the legal mechanism by which Mr Trump imposed these tariffs. This means that these tariffs would have been removed even if India had continued its previous levels of Russian oil purchase.
The decision to shift away from discounted Russian oil could prove costly for India as the current conflict in West Asia has already pushed up global oil prices by more than 8% to hover around the $80 a barrel mark as of mid-day March 2. “Every $1 increase in crude raises India’s annual import bill by approximately $2 billion,” the experts said. “Prolonged tensions may increase logistics and marine insurance costs, disrupt Gulf shipping routes and pressure the trade balance.”
Further, increasing supplies from more distant countries like the U.S. — which saw its share in India’s oil imports increase to 6.8% in January 2026 from 5% a year earlier — means Indian refineries would have to pay higher freight charges, adding to their costs. Even as it lowered oil supplies from Russia, India either retained supply levels from the Gulf countries or has increased them. About 16.6% of India’s oil imports in January 2026 came from Iraq, about the same level as a year earlier. The UAE accounted for another 10.4% of India’s oil imports in January 2026.
Saudi Arabia saw its share of Indian oil imports jump to 17.5% in January 2026, the highest it has been since April 2023. Similarly, Kuwait’s share grew to 6.1%, the highest since February 2023. However, with Iran having closed the crucial Strait of Hormuz, supplies of oil from all of these countries to India are at risk.
“The conflict also complicates matters for India, which imports large amounts of Middle East oil and has agreed to wind down purchases of Russian oil as part of a trade deal with the U.S. — a deal which now sits in limbo after the U.S. Supreme Court struck down U.S. President Donald Trump’s country-based tariffs,” the experts said.
Amid the disruptions of supplies from the Gulf countries due to closure of the Strait of Hormuz, the government and the public sector refiners are said to be mulling increasing imports of Russian crude as part of the effort to ensure oil supply continuity, knowledgeable sources said. India is the world’s third-largest consumer of crude oil with an import dependency level of over 88%. Majority of the country’s gas consumption is also met through imports, and oil and gas supplies from West Asia—which primarily come through the Strait—are critical for India.
The Strait of Hormuz—the narrow waterway between Iran and Oman that connects the Persian Gulf with the Gulf of Oman and the Arabian Sea—is seen as the most important oil transit chokepoint globally, handling approximately one-fifth of global liquid petroleum consumption and global liquefied natural gas (LNG) trade. Late Saturday, Iran’s Islamic Revolutionary Guards Corps (IRGC) transmitted messages to vessels saying that the Strait has been closed, which led to a large number of trading houses, insurers, and vessels suspending shipments through the maritime passage to avoid any potential risk from regional conflict.
According to trade sources, apart from the option of getting oil from Russia, there is continued availability of Russian crude cargoes in the Indian Ocean and Arabian Sea region, including volumes in floating storage. This volume build-up was partly a result of Indian refiners substantially reducing their intake of Russian crude. Roughly 10 million barrels of Russian crude is available in Asian waters, as per industry estimates. In February, India imported 1.1 million barrels per day (bpd) of Russian crude, almost half of the 2025 peak of over 2 million bpd. Loadings of Russian crude for Indian ports, which averaged 1.7 million bpd last year, was just 0.7 million bpd in February.
According to industry insiders, Indian refiners already have crude inventories of over 10 days, along with about a week’s worth of fuel stocks; about a week’s worth of crude is also available in the country’s strategic petroleum reserves. To cover any potential shortfall in import volumes, India could draw on the strategic reserves, accelerate spot procurement from non-Hormuz regions, and deepen supply contracts with alternative suppliers like the US, West Africa, and Latin America.
From a near-term perspective though, the Russian oil readily available in the region could come in handy even as India exercises its other options. In a post on social media platform X, the Ministry of Petroleum and Natural Gas (MoPNG) said it was monitoring the situation in West Asia and would take the necessary steps to ensure availability and affordability of fuels in the country. “In view of ongoing geopolitical developments in the Middle East, the Minister of Petroleum & Natural Gas reviewed the reviewed the supply situation of crude, LPG, and other petroleum products with senior officials from the Ministry and PSUs. We are continuously monitoring the evolving situation, and all necessary steps will be taken in order to ensure availability and affordability of major petroleum products in the country,” the MoPNG posted.
“In a scenario where Middle Eastern imports become constrained or show signs of disruption, Indian refiners—potentially with policy backing — could pivot back to Russian cargoes relatively quickly. From a national energy security standpoint, this flexibility provides India with an additional buffer against short-term geopolitical shocks. Overall, while a Strait of Hormuz disruption would create immediate volatility, India’s diversified sourcing strategy and the presence of alternative barrels in nearby waters reduce the risk of a sustained supply crisis,” the experts said.