Chennai: Early February, India Inc heaved a sigh of relief. The US trade deal was finalized and tariffs fell. Industry leaders, who had spent most of 2025 battling trade disruption, hoped that 2026 will herald a new beginning. But by the end of the month, they were facing a disruption again—far severe than what the tariffs had caused.
On 28 February, Trump did what all his predecessors hesitated to do—attack Iran. The West Asian nation, weakened considerably in recent months due to military setbacks and popular uprising among its people unhappy with their economic condition, did not collapse as Trump had expected. It not only fired missiles and drones at Israel and other Arab neighbours, but also did something it has never done before. It effectively closed the Strait of Hormuz, a crucial sea lane that carries about 15% of global oil and 20% of the gas demand. On an average, 138 vessels pass through this passageway that connects the Persian Gulf to the Arabian Sea every day carrying 14 million barrels of crude and 290 million cubic metres of liquified natural gas (LNG). Very few have passed through it in the last 12 days. Oil and gas prices have consequently shot up.
Far worse is the supply chain disruption it causes not just to oil and gas, but to all the downstream products. This is hurting industries far and wide, forcing governments across the world to intervene and ration energy products.
Trump’s verbal assurances and threats have not helped. He first promised escort for ships transiting through the sea lane. Media reports suggest that the US Navy is declining such requests by the shipowners. He also offered political-risk insurance. No one is taking it. On 10 March, he posted that if Iran stopped oil flow in the Strait of Hormuz, the US would respond with “death, fire, and fury.” On 11 March, Iran responded by warning that “not a litre of oil will flow through the Strait,” and to prove its point, it attacked and set ablaze a few vessels that tried to traverse the sea lane.
“No one knows when the war will end, but what is becoming increasingly clear is that the effect of this war will be felt by India, and the rest of the world, months after it ends,” warned Ajay Srivastava, founder, Global Trade Research Initiative, a trade-focused think tank.
Crude shock
The global oil demand is estimated at 105 million barrels per day (bpd). Of this, 20 million bpd is produced in West Asia. The Strait of Hormuz carries 14 million bpd while pipelines that connect to the Red Sea carry the rest. With shipping through the Red Sea also impacted, the world has lost 20 million bpd of oil every day since the war began and that aggregates up to 200 million barrels which have since filled up the storage facilities. Iraq and Kuwait have shut oil production. Saudi Arabia and the United Arab Emirates will follow suit if the blockade of Strait of Hormuz continues for a few more days. Not surprising that Saudi Aramco’s chief executive officer Amin Nasser is terribly worried.
“There could be catastrophic consequences for the world oil market the longer this disruption goes on,” the head of the world’s fourth-largest oil producer said in a statement to the media. He termed the present crisis as the biggest the region’s oil and gas sector has ever faced.
Wood Mackenzie, a global energy and natural resources research and consultancy firm, estimates that Brent, a benchmark crude, could touch $150 per barrel in the coming weeks. The supply volume at risk is high and if the Strait of Hormuz remains closed for a longer period, Brent could also hit $200 per barrel. Brent crude has been trading at nearly $100 per barrel on 12 March. With conflicting statements emanating from Washington and major divergence in war objectives with Israel, there is no clarity on when the war will end.
In this situation, the US offer to escort ships and thus break the blockade looks interesting. But it may not be viable. Analysts say that if past escorts are considered, the cost of a single escort will be far more than the cost of crude that is being shipped. Also, unlike in the past (during the Iran-Iraq war in late 1980s), drones can easily attack a ship instilling fear among shipping companies.
Oil experts have said that even if the war ends immediately, it will take weeks before the supply can be cranked up. Once the Strait of Hormuz opens, the oil that is loaded in the storage tanks will first need to be evacuated. Post that, efforts will be made to re-start operations.
“Oil production is a very complex process and involves a lot of high pressure equipment. The process of shutdown and re-start has to be done in a very calibrated manner if the equipment is to be protected,” said an oil industry executive who did not want to be quoted as he is not the official spokesperson. “The restart could take three to four weeks.”
The longer the shutdown, more will be the time taken to get the operations back to normal.
According to petroleum minister Hardeep Singh Puri, India has a reasonable stock of crude of over 20 days. It has also been buying Russian crude stranded in the high seas. Its diversified supply base (India sources crude from 40 countries), the minister said, will ensure there are no shortages. Nonetheless, the country will have to pay a higher price for oil.
A tricky situation
Unlike oil, India is in a tricky situation when it comes to gas. “India faces both supply and price risk,” said Vivek Jain, director, India Ratings and Research.
The top five sources—Qatar, the US, the UAE, Angola and Oman—account for 84% of India’s LNG imports. Of this, 60% comes from West Asia (15 million tonnes). This dependency on a handful of LNG suppliers could become a key vulnerability for India. “Unlike oil where small parcels are available, gas market structure drives long term tie-ups and that explains India’s dependence on Qatar,” said Jain. On the other hand, China imports only 30% of its needs from West Asia.
West Asia accounts for 20% of global LNG exports and 82% of it feeds Asia. All of it passes through the Strait of Hormuz. That has been completely disrupted. Worse, QatarEnergy, the biggest LNG player in the region, suspended LNG production after its Ras Laffan complex was hit by a drone. Goldman Sachs has warned that natural gas prices could double from current levels if the blockade extends for more than two months. LNG prices are currently at $15 per million British thermal unit (mBtu), up from $7 levels before the war.
Like oil, restarting operations is a time-consuming process with gas. The gas is cooled into a liquid at -162 degrees before being shipped. It will take Qatar at least a month to achieve normal production from the day it restarts operations at the Ras Laffan facility. QatarEnergy has already announced that it will not restart operation for two weeks. Most countries have low storage capacity as LNG has to be stored at very low temperatures.
India urgently needs to diversify its import base. Today, the US is the largest global exporter followed by Australia and Qatar. Russia is a big player, too. India’s share of imports from Australia is just 0.1%, Russia 0.3% and the US 7.2%. But diversification will take time as the world is chasing every atom of gas that is available. In the meantime, the supply shock is already being felt.
Safe, for now
Natural gas is an important input for producing fertilizers. Of the 30 million tonnes of fertilizers that India produces domestically, 90% is based on regassified LNG (RLNG) as the feed stock, especially to produce Urea. Restriction in availability of RLNG has hit production in most fertilizer companies in India. Fortunately, this is a lean season for fertilizer demand as farm activity is low between mid-March and end-May. To overcome the shortage of gas supply, many companies are advancing their annual maintenance shutdown.
India also has adequate stock of fertilizers. “Urea and phosphatic fertilizer supplies remain adequate to meet the agricultural requirements for the upcoming Kharif season,” the Fertiliser Association of India said in a statement. In the first 10 months of 2025-26, India had reported higher fertilizer imports and domestic production at 65 million tonnes as against 57 million tonnes in the same period last year. “We are comfortable for the next few months and we hope the Strait of Hormuz will re-open soon,” said Sanjiv Kanwar, managing director, Yara Fertilizers.
Here again, the problems will surface if the war prolongs the blockade. Apart from RLNG, key raw materials such as sulphur, ammonia, rock phosphate and phosphoric acid are imported from West Asia. These are downstream products of crude oil, and if oil production halts, manufacturing of these products will also be disrupted leading to shortages. Also, India imports 50% of its urea and diammonium phosphate needs from the region.
Double whammy
Unlike the fertilizer sector, the present disruption comes during the textile sector’s peak season—apparel exporters were reading to ship their goods for the Easter season. There is a risk of some exporters missing out on the season entirely.
“Container rates have shot up by 400% and ships take more time as they have to go around Africa,” said Christopher Fernandes, founder, Prompt Services. The company handles pre-shipment and post-shipment documentation for exporters. “Air freight is even worse. Cargo is stranded at the terminals due to lack of adequate freighters,” he added.
On the input side, the man-made fibre (MMF) segment of the textile industry is facing a major challenge as the critical polymer supply chain has snapped. “Polyester is made from purified terephthalic acid (PTA) and mono ethylene glycol (MEG). We have adequate domestic capacity for PTA. But for MEG, we are dependent on West Asia,” said Sunil JhunJhunWala, co-founder and managing director, Techno Sportswear Pvt. Ltd, India’s homegrown active wear brand.
Indian polyester filament yarn makers face an imminent shutdown in the next 10-15 days. With crude production stopping in West Asia, production across the polymer supply chain, including MEG, will be disrupted. China, a major exporter of polyester yarn, is already curtailing supplies. It is also a major importer of MEG from West Asia.
Apart from the above four sectors, almost all industries will be impacted due to higher costs and shortage of key inputs. Experts say that it would take at least three months for the shipping and air freight sectors to normalise.
The question in everybody’s mind: when will the war end and when will things return to normal? No expert is willing to hazard a guess. The US administration has been talking in multiple voices while Israel is determined to bring about a regime change and weaken Iran economically. Here are the possible scenarios:
Scenario 1: War ends immediately
Trump decides to end the war immediately and claim victory. Iran too agrees for a ceasefire and opens the Strait of Hormuz. After all, it exports 1.65 million bpd of oil, mostly to China, through this passageway. Oil and gas will start getting evacuated from the region and production will re-start in three to four weeks. Prices will stabilize. Normalcy may return in a couple of months.
Scenario 2: War rages for 1-2 months
Either Trump does not end the war or Iran continues to fight. The Strait of Hormuz remains shut. Oil prices will rise again and may even touch $150 per barrel. Saudi Arabia and the UAE would have also shut most of their production. Gas availability will drop sharply, hurting fertilizer and other sectors dependent on natural gas. Logistics disruption will worsen. India’s oil import bill will rise, the rupee will weaken and inflation will be tested. Recovery will take many months after the war ends.
Scenario 3: War continues for months
The US gets trapped in a long war. There is no regime change and Iran continues to fight keeping the Strait of Hormuz closed. Oil prices will touch $200 per barrel. Most countries will face an energy crisis. Shortages will be rampant. Inflation will spiral forcing central banks to raise interest rates which will hurt economic growth. Many countries may slip into a recession. And India’s growth will slow—considerably.