Impact of the ongoing West Asia conflict on India’s energy security

Introduction

West Asia is the world’s most important energy-producing region and a key supplier of crude oil and natural gas. Any geopolitical instability in the region directly affects global energy markets. The ongoing conflict has pushed crude oil prices above $100 per barrel and raised concerns over supply disruptions through the Strait of Hormuz, thereby posing significant risks to India’s energy security.

Impact on India’s Energy Security

1. Supply Disruptions

• Around one-fifth of global petroleum and large volumes of LNG pass through the Strait of Hormuz.

• Nearly 40–50% of India’s crude oil imports transit through this route, making the country highly vulnerable to disruptions.

2. Rising Import Bill

• India imports over 88% of its crude oil requirements.

• Rising oil prices significantly increase the current account deficit (CAD) and put pressure on the fiscal balance.

3. Inflationary Pressures

• Higher crude prices raise transportation and production costs, leading to cost-push inflation across sectors like fertilisers, chemicals, and logistics.

4. Currency Depreciation and Market Volatility

• Increased oil import payments increase demand for dollars, causing rupee depreciation.

• Equity markets may also decline due to fears of inflation and interest rate hikes.

5. Strategic and Maritime Risks

• Attacks on oil infrastructure and shipping lanes increase insurance and shipping costs.

• It highlights vulnerabilities in global energy supply chains.

India’s Policy Response

• Diversification of oil sources (Russia, USA, Latin America).

• Utilisation of Strategic Petroleum Reserves (SPR).

• Promotion of renewable energy and biofuels to reduce dependence.

• Strengthening energy diplomacy with Gulf countries.

Conclusion

The West Asian conflict underscores India’s structural vulnerability due to heavy oil import dependence. In the long run, strengthening energy diversification, strategic reserves, and renewable energy capacity will be crucial for ensuring sustainable energy security and economic stability.

Source: Indian Express