Strait of Hormuz tensions inflate India's fossil fuel import bill by $22 billion

Escalating tensions around the Strait of Hormuz have imposed a heavy financial burden on India's energy sector, driving up fossil fuel import expenditures by an estimated $22 billion, according to analysis by the Council on Energy, Environment and Water (CEEW).

The crisis in one of the world's most critical shipping channels has disrupted global energy markets and forced India to absorb higher costs across crude oil, natural gas, and coal imports. The heightened geopolitical risks have pushed up insurance premiums, shipping costs, and energy prices more broadly as traders price in supply uncertainties.

The economic impact on India has been substantial. The net additional cost to the country across all fossil fuels stands at approximately $14.4 billion, equivalent to 0.38 per cent of India's GDP or roughly 1.4 days of the nation's total income. The figures underscore India's vulnerability to supply-side shocks in critical energy corridors and highlight the risks posed by concentration of global oil trade through a single strategic waterway.

Analysts say the situation underscores the urgency for India to diversify its energy sources and strengthen its renewable energy infrastructure to reduce dependence on volatile international fossil fuel markets. The country's rapidly growing energy demand makes it particularly exposed to supply disruptions and price volatility in geopolitically sensitive regions.