India

India is the world’s third-largest importer of oil, fourth-largest of liquid natural gas (LNG), and second-largest of liquid petroleum gas (LPG). Before the closure of the Strait of Hormuz, India sourced significant portions of these commodities from the Gulf, relying on their transit through the Strait. It also depended on inputs that transited the Strait as feedstock for its key exports, ranging from refined petroleum and petrochemical exports, as well as medications and pharmaceuticals.

Government interventions such as subsidies and fuel tax cuts are mitigating the impacts so far, but at growing fiscal cost. Households are already feeling the strain: the administered price of cooking gas cylinders has been raised twice, and subsidized refills for low-income families have been cut. A sustained Hormuz disruption would not derail India’s growth ambitions, but it could fuel inflation, widen India’s current account deficit, and weaken the Indian rupee, all of which could crowd out private investment over time.

Price increases from prolonged LPG disruptions, which over 60 percent of Indian households rely on for cooking, would show up quickly in household budgets and public sentiment. India sources nearly 84 percent of sulfur imports from the Gulf, leading to higher fertilizer costs. With 42 percent of India’s workforce employed in agriculture, even a moderate shock to farm economics would have outsized consequences for rural consumption and employment.

India’s generic pharmaceutical sector operates on very thin margins, and its global competitiveness depends on affordable energy, reliable petrochemical inputs, and access to imported raw materials. Prolonged Hormuz disruptions would affect all three. Higher oil and petrochemical prices would increase domestic manufacturing and packaging costs. Imported active pharmaceutical ingredients (APIs) and intermediates would become more expensive. Higher freight, insurance, and fuel costs would further compress margins. The result is a challenge for one of India’s most visible and strategically important export sectors, although India’s largest pharmaceutical players may be better able to absorb the margin pressure and gain market share.

 If energy prices stay high, India’s energy transition will likely experience faster and more urgent deployment even as supply chain dependencies threaten to cap its pace. Already, India added a record 55 gigawatts (GW) of non-fossil fuel capacity in 2025, with its EV market projected to grow from USD 2 billion today to USD 164 billion by 2033. The durability of India’s production-linked incentive schemes, which offer manufacturers financial incentives tied to incremental domestic output rather than up-front subsidies, will be an important predictor of New Delhi’s ability to build a domestic clean-tech manufacturing base. However, China’s rare earths dominance means India risks replacing one import dependency with another; India is attempting to navigate this challenge with domestic investments and international partnerships.

Compounding cost-of-living pressures are the main vector by which commodity disruptions could become a deeper economic and political challenge for the Indian government. New Delhi has deployed tools, including subsidies, fuel tax cuts, and targeted welfare programs, to cushion the short-term impacts, but sustained intervention would strain public finances and complicate efforts to maintain budget discipline. 

LPG availability, fertilizer prices, freight costs, and monsoon performance are key indicators to watch to determine whether disruptions are compounding to create a wider inflationary challenge. Government decisions on whether to extend subsidies and tax relief measures will be important signals of New Delhi’s concern. Sustained pressure on rural incomes and manufacturing margins could also erode public support for trade liberalization even as India is negotiating and benefiting from greater economic integration with a range of global partners, including the United States, which has emerged as a key source of LPG since the start of the crisis. 

For India’s energy mix, continuing disruptions could accelerate trends already underway, including a push to diversify energy suppliers across geographies as diverse as Russia, Africa, and North and South America. They could also fast-track domestic efforts to expand domestic energy supply in ways that reshape India’s energy posture for the longer term. New Delhi could open up for development areas with proven energy reserves such as in India’s northeastern states, pave the way for companies to explore for gas deposits in the Andaman Sea, and introduce incentives for coal gasification.