The joint US-Israeli strike on Iran and subsequent Iranian retaliation threaten to disrupt the movement of goods through the Strait of Hormuz, which could lead to a rise in global crude oil prices and a depreciation of the rupee against the dollar, experts said.
These people, some of whom requested to remain anonymous, said a prolonged conflict could severely impact global energy supplies, particularly India, the world’s third-largest oil consumer after the United States and China. Under US pressure, India has already reduced its purchases of Russian crude oil.
The conflict is expected to disrupt supplies from the Gulf region and lead to a significant jump in insurance premiums. This puts India in an awkward position due to the potential rise in oil prices due to the supply crunch, they said. With Russian oil production already declining due to US sanctions, the conflict may also disrupt 3 million barrels per day of Iranian crude supplied to various countries, including China.
“Supply may shrink if the conflict escalates and prolongs, which could lead to a jump in the cost of India’s crude oil imports. Besides Russian restrictions, the harsh winter demand has also led to the US withdrawing oil from its strategic reserve. Therefore, supply could be affected. This means pricing pressure on India,” said S C Sharma, an energy expert and former staffer on special duty at the erstwhile Planning Commission.
India’s average crude oil buying price has already seen a jump of over 10% to US$70.86 per barrel on Thursday due to geopolitical unrest from US$64.2 per barrel a month ago. If tensions continue, the price may rise further.
Iran has repeatedly threatened to use the Strait of Hormuz as a weapon, although a full closure has never been implemented. Tehran’s restraint stems from economic self-interest: it relies on the waterway to ship crude oil to China, its strategic backer. But in January 2026, it renewed threats of closure and briefly closed part of the strait during exercises. This four-decade pattern of escalation and restraint is now facing its final test.
Another expert said more will be clearer as the situation develops. “It is too early to comment on the impact of the conflict on trade. But a prolonged conflict could see rising freight charges, insurance costs and higher demand for the dollar, which could lead to further depreciation of the rupee against the dollar,” said Ajay Sahai, Director General and CEO, Federation of Indian Export Organizations (FIEO).
Exporters fear that the escalation in the Gulf region will lead to a bottleneck in shipping routes, forcing supplies to take a longer route via the Cape of Good Hope, which will see a jump in transportation costs.
“Not all costs can be passed on to the consumer. Therefore, merchants will bear a large share of the burden,” said one of the sources, who requested anonymity.
“The conflict in the Middle East and reported attacks on several oil producers will exacerbate volatility in crude oil prices,” said Prashant Vashisht, Senior Vice President and Associate Group Head of Corporate Ratings at ICRA Limited.
He added: “The Strait of Hormuz is a vital energy choke point through which about 20% of the world’s petroleum liquid and 20% of the world’s liquefied natural gas pass. Since Iran and energy producers in the Middle East extend through the Strait of Hormuz, conflict in the region would hinder the shipment of energy through it.”
He added that due to global geopolitical tensions, crude oil prices have already risen from over $65 per barrel to $72-73 per barrel.
“A prolonged and/or widening conflict involving multiple oil and gas producers and the Strait of Hormuz could negatively impact global crude oil and LNG supplies and raise energy prices globally,” Vasisht said.
In fiscal year 2025, about 50% of India’s crude oil imports and 54% of liquefied natural gas (LNG) were routed through the Strait of Hormuz. For Indian refiners, while crude oil can be sourced from alternative locations like the US, Africa and South America, rising energy prices may lead to a higher import bill, he added.
He added: “In addition, the rise in crude oil prices would reduce the marketing margins and profitability of oil marketing companies.”
