The escalating geopolitical confrontation between the United States and Iran has brought global attention back to one of the world’s most strategically sensitive maritime chokepoints — the Strait of Hormuz.

Nearly 20–21% of global oil trade and a significant portion of LPG, petrochemicals, and fertilizer raw materials pass through this narrow corridor daily. Any disruption here instantly reverberates across global energy markets, food supply chains, and international trade flows.

For India — the world’s third-largest energy importer and one of the largest fertilizer consumers globally — the implications are profound and immediate.

While crude oil shocks dominate global headlines, a less visible but potentially more dangerous crisis is emerging in India’s fertilizer supply chain, threatening the livelihoods of 140 million farming households and the broader stability of India’s food economy.

This analysis examines the multi-dimensional impact of a potential disruption of the Strait of Hormuz on India’s imports and exports, particularly across critical sectors such as:

• Crude Oil
• LPG
• Fertilizers (Urea, DAP, and Phosphatics)
• Agricultural exports such as Basmati Rice

The Strait of Hormuz: A Strategic Chokepoint for Global Trade

The Strait of Hormuz, located between the Persian Gulf and the Gulf of Oman, is one of the most strategically important maritime passages in the world.

At its narrowest point, the strait is only about 39 kilometers wide, yet it carries a massive portion of the world’s energy trade.

Every day, approximately:

• 20 million barrels of crude oil
• Significant volumes of LNG and LPG
• Fertilizer raw materials such as ammonia and phosphoric acid

transit through this narrow corridor.

For India, this maritime route is not just important — it is structurally critical to the functioning of the economy.

India’s trade exposure to the Gulf region through this route spans multiple strategic sectors including energy imports, fertilizer supplies, petrochemical feedstocks, and agricultural exports.

A prolonged disruption of the Strait of Hormuz would therefore affect both sides of India’s trade balance — imports as well as exports.

Crude Oil: India’s Energy Lifeline Under Threat

India imports roughly 85% of its crude oil requirements, making it one of the most import-dependent major economies in the world.

A substantial share of these imports originates from Gulf producers including:

• Saudi Arabia
• Iraq
• United Arab Emirates
• Kuwait

Crude shipments from these producers must pass through the Strait of Hormuz before reaching global markets.

A disruption in this corridor could trigger immediate volatility in global oil markets.

Industry analysts suggest that sustained geopolitical escalation could push Brent crude prices into the $110–$130 per barrel range, significantly increasing India’s import bill.

Beyond price increases, logistical complications would also arise.

Shipping companies may reroute vessels, reduce sailings through high-risk zones, or demand significantly higher freight charges. Tanker availability could tighten, creating delays in refinery supply chains.

Indian refiners operated by companies such as Indian Oil Corporation, Reliance Industries, and Bharat Petroleum would face volatile input costs, squeezing refining margins and potentially impacting domestic fuel pricing.

LPG Supply Risks: Implications for Household Energy

India is one of the largest LPG consumers and importers in the world.

More than half of India’s LPG imports originate from the Middle East, particularly from suppliers such as:

• Qatar
• Saudi Arabia
• United Arab Emirates

These cargoes also transit through the Strait of Hormuz.

A disruption would likely lead to higher LPG import costs, which could translate into increased subsidy requirements for the Indian government or higher retail prices for consumers.

India’s household energy ecosystem — particularly the Ujjwala program, which has expanded LPG access to tens of millions of rural households — could face affordability pressures if global LPG prices surge due to supply disruptions.

The Silent Crisis: Fertilizer Supply Chain Disruptions

While crude oil shocks dominate international headlines, the most significant long-term risk for India may lie in the fertilizer supply chain.

India is one of the largest fertilizer consumers globally due to its vast agricultural sector and the scale of its farming population.

The country imports large quantities of:

• Urea
• DAP (Di-Ammonium Phosphate)
• Phosphatic fertilizers
• Ammonia and phosphoric acid

A significant portion of these supplies originates from the Gulf region.

Major fertilizer exporters linked to India’s supply chain include countries such as:

• Oman
• Saudi Arabia
• Qatar

Approximately 40% of India’s urea and phosphatic fertilizer supply chain is connected directly or indirectly to this region.

The geopolitical tensions have already begun affecting fertilizer markets.

Urea prices have reportedly surged from $470 per ton to approximately $647 per ton, reflecting both supply uncertainty and sharply rising logistics costs.

War-risk insurance premiums for vessels operating in the Gulf have increased by nearly 1,000% within a week, dramatically raising freight costs for bulk cargo shipments.

For India, the consequences extend far beyond trade balances.

With nearly 140 million farming households dependent on timely fertilizer availability, disruptions in supply could affect crop yields, farm incomes, and overall food production.

This transforms the issue from an energy or logistics challenge into a national food security concern.

Basmati Rice Exports: A Key Agricultural Trade Exposure

India is the world’s leading exporter of Basmati rice, a premium agricultural product that commands strong demand in Middle Eastern markets.

Some of the largest importers of Indian Basmati rice include:

• Iran
• Saudi Arabia
• United Arab Emirates
• Iraq

These markets collectively account for a significant share of India’s Basmati rice exports.

A disruption in shipping routes through the Strait of Hormuz could create logistical bottlenecks for containerized agricultural exports.

Exporters could face:

• Shipment delays
• Higher container freight rates
• Increased insurance costs
• Payment settlement challenges due to geopolitical sanctions or financial restrictions

For an industry valued at $5–6 billion annually, sustained trade disruption could impact both exporters and farmers linked to the Basmati supply chain.

The Insurance Shock: The Hidden Cost of Conflict

One of the most immediate consequences of geopolitical escalation in the Gulf is the surge in marine war-risk insurance premiums.

Shipping companies operating in high-risk conflict zones must purchase additional insurance coverage, which is often passed on to cargo owners.

Recent reports indicate that war-risk premiums have surged by nearly tenfold within a matter of days.

For large crude oil tankers carrying approximately two million barrels of oil, insurance costs could jump from around $200,000 per voyage to over $2 million.

This cost escalation affects not only oil shipments but also bulk cargoes such as fertilizers and containerized goods.

Strategic Implications for India

The unfolding crisis highlights several structural vulnerabilities in India’s trade ecosystem.

India’s heavy reliance on Gulf energy supplies creates a major exposure to geopolitical tensions in the region.

Similarly, the concentration of fertilizer imports from a limited set of countries exposes the agricultural sector to supply disruptions.

In addition, a large portion of India’s export markets in West Asia depend on the same maritime corridor for trade connectivity.

These overlapping dependencies mean that a disruption in the Strait of Hormuz can simultaneously affect energy imports, agricultural inputs, and export revenues.

Strategic Mitigation Pathways for India

To reduce its vulnerability to maritime chokepoints and geopolitical risks, India must accelerate several strategic initiatives.

Energy diversification will be critical, including expanding crude sourcing from emerging producers such as:

• United States
• Brazil
• Guyana

India must also broaden its fertilizer sourcing network by increasing procurement from countries including:

• Morocco
• Russia
• Canada

In addition, the creation of strategic fertilizer reserves, similar to strategic petroleum reserves, could help stabilize supply during geopolitical crises.

Boosting domestic fertilizer production, including investments in green ammonia and new urea plants, will also reduce import dependence.

Strengthening India’s maritime logistics capabilities, expanding the national tanker fleet, and developing robust shipping insurance frameworks will further enhance resilience.

Conclusion: A Maritime Conflict with Food-Energy Consequences

The escalating tensions between the United States and Iran represent more than a regional geopolitical confrontation.

For India, the situation poses a systemic risk spanning energy security, agricultural stability, and international trade flows.

While oil price volatility dominates global media coverage, the deeper risk lies in fertilizer supply disruptions that could directly affect India’s agricultural productivity and food security.

The Strait of Hormuz has long been recognized as one of the world’s most important maritime chokepoints.

Today, it is also emerging as a pressure point for the stability of India’s economy.

The lesson for policymakers, businesses, and global traders is clear:

In the modern geopolitical landscape, maritime corridors are not merely shipping routes — they are strategic arteries of global economic security.

Prepared by
Entellus International Private Limited

Global Trade | Strategic Sourcing | International Market Intelligence

Connecting markets. Enabling trade. Strengthening global supply chains.

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