The Strait of Hormuz has become highly unsafe amid the US-Israel-Iran war, threatening nearly 20 per cent of global oil and gas supplies. For India, rising dependence on Middle Eastern energy makes the situation particularly critical.
As Middle East crisis escalates, India is beginning to feel the tremors at home. Nearly half of India’s crude oil imports, along with a significant share of its liquefied natural gas (LNG) and liquefied petroleum gas (LPG) shipments, typically pass through the Strait of Hormuz — the narrow Gulf chokepoint that is now effectively closed due to the conflict.
Data from PPAC (Petroleum Planning and Analysis Cell) highlights India’s heavy energy dependence: 88.6 per cent crude oil dependency in FY26, 91 per cent LPG from the Middle East, 68.4 per cent LNG reliance, and only 10 days of LPG cover with 1 MT stored versus a 3 MT monthly requirement, as per a report by invest4Edu.
To understand the extent of India’s dependence, the government had set a 2015 target to reduce crude import dependency to 67 per cent by 2022. Instead, it has risen every year from 83.8 per cent in FY19 to 88.6 per cent today. Domestic oil production has slightly declined to 23.5 million tonnes this year, while consumption grew by 1.6 per cent, the report added.
What has broken down?
QatarEnergy declared force majeure at Ras Laffan, the world’s largest LNG export terminal, after Iranian drone strikes. Saudi Aramco halted the Juaymah NGL facility and also declared force majeure, while the Strait of Hormuz disruption has put around 20 per cent of global energy supply at risk. India’s LPG storage stands at only 1 million tonnes.
Why it matters for India?
LNG allocations to Petronet LNG from GAIL dropped to zero from March 4, with 47.4 mmscmd of LNG supply now under force majeure. Juaymah, which supplies about 15 per cent of India’s LPG imports, has been halted overnight. India lacks alternate supply infrastructure, while spot LNG prices have doubled to $24-25/mmbtu from around $12. With monthly demand at 3 million tonnes, India has barely 10 days of LPG cover and no strategic LPG reserve, unlike crude oil which has an SPR, according to invest4Edu.
Government’s response
On March 9, 2026, the Government invoked the Essential Commodities Act and issued the Natural Gas (Supply Regulation) Order, 2026. In simple, the government has taken direct control of all gas supply and decided who gets it and how much. All private contracts and commercial gas agreements are overridden. No company can go to court to challenge this order and no company can resell gas that has been diverted to them. This is emergency wartime-level economic regulation.
Compounding pressures
In India’s modern economy, no major industry operates independently. A disruption in energy supply or shipping doesn’t just hit one sector; it triggers a domino effect, with every industry directly or indirectly feeling the pinch, invest4Edu report stated.
Moreover, ongoing trade disruptions are being exacerbated by surging freight charges, creating an additional barrier that compounds the energy crisis and impacts sectors from manufacturing to small businesses through rising costs and supply delays.
Rationing order
The government has created a strict gas allocation hierarchy, managed by GAIL in coordination with PPAC.
Priority 1: Domestic household PNG connections, CNG for autos and buses, LPG cylinder production and pipeline operations receive 100 per cent of the six-month average supply, ensuring household gas and transport remain fully protected.
Priority 2: Fertiliser plants (gas used only for fertiliser production) receive 70 per cent of normal supply, allowing operations at reduced capacity and likely increasing urea costs.
Priority 3: General manufacturing industries and industrial grid consumers receive around 80 per cent of normal supply, implying factories operate at 80 per cent capacity with a 20 per cent production loss.
Priority 4: City Gas Distribution for commercial and industrial customers also receives about 80 per cent of normal supply, leading to a 20 per cent cut for hotels, restaurants, workshops and small businesses.
Additional measures for LPG
Under the LPG diversion order, all propane and butane that would typically go to petrochemical factories have been redirected to domestic LPG cylinder production. While this helps maintain household cylinder supply, it comes at the cost of chemical plants shutting down, as per invest4Edu.
Additionally, the LPG rebooking cycle has been extended from 21 to 25 days, with the government aiming to curb panic buying, prevent artificial demand spikes and conserve existing stocks.
