As tensions escalate between the United States, Israel, and Iran, India is beginning to experience the ripple effects of the conflict, revealing its deep economic and strategic ties to the Middle East. The ongoing war has placed a spotlight on India’s vulnerabilities, particularly in energy security, remittances from its vast diaspora, and diplomatic balancing acts, as the country navigates a fraught geopolitical landscape.
A critical concern for India centers on the Strait of Hormuz, a narrow but vital maritime chokepoint through which nearly half of India’s crude oil imports pass. This strategic waterway, located in the Persian Gulf, has effectively been closed due to recent hostilities and threats of attacks on vessels by Iran. Approximately 2.5 to 2.7 million barrels of crude oil per day, sourced mainly from Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait, transit this artery to fuel India’s economy. Given that India imports roughly 90 percent of its oil needs, the closure of the strait threatens to disrupt supply chains and inflate energy prices.
However, the challenge runs deeper than crude oil alone. India’s energy consumption has undergone structural shifts in recent years, with liquefied petroleum gas (LPG) and liquefied natural gas (LNG) becoming essential components of its energy mix. Government initiatives have expanded LPG usage for cooking, replacing traditional biomass fuels and dramatically increasing demand. India now imports around 80 to 85 percent of its LPG, making it the world’s second-largest importer after China. Nearly all these shipments come from Gulf countries and traverse the Strait of Hormuz.
Similarly, India’s growing reliance on LNG for electricity generation, fertilizers, transportation, and industry underscores its vulnerability. Last year, India imported approximately 25 million tonnes of LNG, with over half passing through Hormuz. Unlike crude oil, India lacks significant strategic reserves or storage capacity for LPG and LNG, meaning that any prolonged disruption could quickly lead to shortages. Analysts highlight that while India maintains about 100 million barrels of crude oil in reserves—sufficient for roughly a month of consumption—it only holds enough LPG stocks to cover two to three weeks of demand.
Despite these risks, experts suggest that India is not yet facing immediate fuel shortages. Maritime intelligence firms anticipate temporary slowdowns, rerouting of vessels, or heightened security inspections rather than a prolonged blockade of the strait. India also has alternative oil sources, such as Russia and countries in the Atlantic Basin, though these options involve longer shipping times and higher costs. Notably, India has been able to pivot to Russian crude in the past and currently has tens of millions of barrels of Russian oil floating in the Indian Ocean, awaiting buyers.
Financially, the conflict is already pushing costs upward. Brent crude prices, shipping rates, and war-risk insurance premiums have surged, increasing India’s import bill even if actual supplies remain intact in the short term. Inflation could also rise, with every $10 increase in oil prices potentially adding 0.2 to 0.25 percentage points to inflation if costs are passed on to consumers. Conversely, government efforts to shield consumers by reducing fuel taxes would widen the fiscal deficit.
Beyond energy, India’s connection to the Gulf region runs through its vast diaspora and the remittances they send home. Approximately 10 million Indians live and work in the six Gulf Cooperation Council (GCC) countries—Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain—accounting for nearly half of India’s global overseas population of around 18.5 million. Unlike earlier waves of temporary labor migration, many of these expatriates and their families have settled in the region, with significant numbers of Indian schoolchildren enrolled in Gulf countries.
The remittances sent by this diaspora are a lifeline for millions of Indian households and a critical pillar of the nation’s external economic stability. India received a record $135 billion in remittances in 2024-2025, the highest in the world, with Gulf workers contributing a substantial share. These funds finance nearly half of India’s merchandise trade deficit and support sectors ranging from construction and services to energy. For instance, the southern state of Kerala alone receives about 20 percent of India’s remittances, highlighting the dependence of certain regions on Gulf migration.
The ongoing conflict poses significant risks to this economic lifeline. Prolonged instability could disrupt employment, schooling, and the safety of millions of Indian expatriates, potentially forcing evacuations and