India's energy security remains highly vulnerable to disruptions in the Strait of Hormuz and the Red Sea: CareEdge Ratings
According to CareEdge Ratings, India's energy security remains highly vulnerable to disruptions in the Strait of Hormuz (Hormuz) and the Red Sea. Around 40% of India's crude imports and a significant share of LNG and LPG supplies depend on Hormuz. Brent crude oil peaked at ~USD 115 per barrel in May 2026 following disruptions in the Hormuz, while simultaneous disruptions in both chokepoints could push prices to USD 130–135 per barrel, fuelling inflation and disrupting energy supplies.
CareEdge Ratings notes that the West Asia conflict has triggered an unprecedented energy shock to India since March 2026. While diversified sourcing, particularly Russian crude has helped secure oil supplies, the economic fallout is mounting. Brent crude has touched USD 100/bbl, war-risk insurance premiums have surged by up to 1,000%, following the closure of Hormuz and disruptions in the Bab-el-Mandeb Strait (Bab). These disruptions are driving inflation, straining foreign exchange reserves, and affecting sectors including crude oil, petroleum products, LPG, fertilisers, aviation, basmati rice, packaging based on plastic polymers, among others.
Amidst escalating tensions in West Asia, the Houthi movement in Yemen has threatened disruptions to maritime traffic at Red Sea and has reportedly carried out attacks on Saudi oil vessels. Additionally, Iran has instructed the Houthis to prepare for the closure of the Bab in the event of United States military strikes on critical Iranian infrastructure. Combined with heightened risks of the Hormuz closing and potential disruptions in Bab, this dual-threat scenario poses a severe risk to global logistics, energy supply chains, and India's macroeconomic stability.
CareEge Ratings highlights that prolonged West Asia instability and dual chokepoint disruptions at the Strait of Hormuz and Red Sea could raise marine insurance premiums, freight costs, and transit times, impacting the profitability of Indian exporters and importers, particularly small and mid-sized firms with limited pricing power. Disruptions to crude oil, petroleum products, and LNG supplies could increase input costs for energy-intensive industries, while rerouting of container traffic via the Cape of Good Hope could extend delivery timelines by 2–3 weeks and raise logistics costs. Perishable goods, food grains, and low-margin cargo segments would face greater pressure due to limited ability to absorb higher transportation costs, affecting margins and working capital cycles.
Priti Agarwal, Senior Director, CareEdge Ratings said, “A simultaneous closure of the Strait of Hormuz and the Red Sea, even for a few weeks, could trigger a sharp surge in global energy prices, with Brent crude potentially rising to $130–135 per barrel and LNG supplies across Asia and Europe coming under significant strain. Beyond the energy sector, such disruptions could further elevate marine insurance premiums, exacerbate port congestion, extend shipping routes and transit times, and increase freight costs across global supply chains”.
Puneet Kansal, Director, CareEdge Ratings notes that, “The ongoing West Asia conflict and emerging dual chokepoint risks at the Strait of Hormuz and Red Sea may create renewed credit pressure for Indian corporates by elevating input costs, disrupting supply chains, and weakening operating cash flows. While larger companies with pricing power and diversified sourcing may absorb the shock, smaller and mid-sized enterprises with limited ability to pass on costs could face margin compression, higher working capital requirements, and liquidity stress”.
The Strait of Hormuz is a vital maritime narrow corridor connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is the main shipping route for energy exports from major producers like Saudi Arabia, Iraq, Iran, Kuwait, Qatar, and the UAE. About 20% of the global oil consumption and one-third of the world’s liquified natural gas (LNG) flows through Hormuz.
The Bab-el-Mandeb Strait is the only entry point to the Red Sea from the Indian Ocean and connects to the Suez Canal, forming a vital trade route between Asia and Europe. It is a key chokepoint for the movement of crude oil, petroleum products, agriculture, textiles, automobiles, electronics, etc. India is heavily reliant on the Red Sea as roughly 50% of its total exports and 30% of imports pass through this region.
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