Strait of Hormuz Crisis 2025: How Iran's Threat Could Disrupt India's Economy and Global Oil Markets
- TPP
- Jun 22
- 5 min read
Updated: Jun 24
The Strait of Hormuz, a narrow but globally significant maritime chokepoint, has once again become the center of international concern following recent military escalations. Iran’s Parliament has approved a proposal to close the Strait, though the final decision lies with its Supreme National Security Council, according to state-run Press TV. This bold move comes in the wake of U.S. airstrikes on three Iranian military sites, drastically altering the strategic calculus in the region.
What is the Strait of Hormuz and Why is It So Critical?
The Strait of Hormuz is a strategic maritime passage that connects the Persian Gulf with the Gulf of Oman, eventually leading into the Arabian Sea. This waterway lies between Iran and Oman, making it a geopolitically sensitive zone. It serves as the only sea route from the Persian Gulf to open waters, making it a vital corridor for energy exports from countries like Saudi Arabia, UAE, Iraq, Kuwait, and Iran itself.
Though narrow—just 33 km wide at its narrowest point, with only 3 km-wide lanes for inbound and outbound ships—the strait handles around 20 million barrels of oil per day, which accounts for nearly 20% of global daily oil consumption and over 25% of liquefied natural gas (LNG) shipments, especially from Qatar. This narrowness also makes it vulnerable to disruption, whether by mining, missile attacks, or detention of ships.
Why Iran's Threat is a Potent Global Risk
Historically, Iran has never actually closed the Strait of Hormuz, even during periods of intense conflict like the Iran-Iraq War in the 1980s, when both nations attacked oil tankers but allowed traffic to pass. The threat alone, however, has often been used as a bargaining chip or deterrent against U.S. or Western aggression.
Iran’s dependence on the Strait for its own exports and trade, especially to key allies like China, has historically stayed its hand. China is Iran’s biggest oil buyer, often purchasing at discounted rates due to Western sanctions. Any disruption in the Strait would hurt China’s energy security, and Beijing may pressure Tehran to avoid such drastic action. Moreover, Iran's other major clients include India, which also stands to suffer from any disruption.
A blockade would not only hurt Iran’s enemies but also strain its relationships with regional partners like Oman and members of the Gulf Cooperation Council (GCC). Oman, which controls the southern half of the strait, has historically maintained a neutral and cooperative relationship with Tehran. Upsetting this balance could have diplomatic and logistical consequences for Iran.
Additionally, closing the Strait could result in internal instability within Iran. Higher domestic prices, economic strain, and potential international backlash could fuel public unrest, which might challenge the regime’s stability—especially at a time when President Masoud Pezeshkian is seen as a relatively moderate figure.
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Impact on India: A Looming Energy Shock?
India, which imports over 85% of its crude oil, is heavily reliant on shipments that pass through the Strait of Hormuz. Of the 5.5 million barrels per day that India consumes, 1.5 million barrels transit through this strategic chokepoint. Additionally, nearly half of India’s LNG imports also come via this route.
According to the U.S. Energy Information Administration (EIA), in 2024, 84% of the crude oil and 83% of LNG that moved through the Strait went to Asian markets, with China, India, Japan, and South Korea accounting for 69% of all shipments.
Any disruption, even temporary, would spike global oil prices, increasing insurance premiums, freight charges, and overall transportation costs. Robinder Sachdev, a foreign affairs expert, highlighted that a $10 increase in crude oil prices could shave 0.5% off India’s GDP. The inflationary impact would be felt across sectors, from transportation to food and manufacturing.
India, however, appears somewhat prepared. Union Minister Hardeep Singh Puri recently stated that India has diversified crude sources outside the Persian Gulf and could source from Russia, the U.S., Latin America, and Africa. He emphasized that the supply itself isn't the issue—price volatility is. India is also a net exporter of petroleum products, with companies like Reliance Industries and Nayara Energy shipping to nations like the UAE, Singapore, the U.S., and Australia. If required, exports may be reduced to prioritize domestic consumption.
Are There Alternatives to the Strait?
There are a few limited alternatives to bypass the Strait, but they cannot match its capacity:
Saudi Arabia’s East-West pipeline (from Abqaiq to Yanbu) can transport 5 million barrels/day.
The UAE operates a pipeline from its onshore oil fields to Fujairah on the Gulf of Oman with a capacity of 1.8 million barrels/day.
Compare this to the 20 million barrels/day that pass through Hormuz—no alternate route comes close. Even with these, global markets would still face massive supply and price disruptions if Hormuz were blocked.
Past Flashpoints and the "Tanker War"
In the 1980s, during the Iran-Iraq Tanker War, Iran attacked Kuwaiti and Saudi ships, prompting the U.S. to launch Operation Earnest Will, which became the largest U.S. maritime convoy operation since WWII. While attacks occurred, the Strait remained open, underlining how even in war, complete closure has been avoided.
In 2011-2012 and again in 2019, Iran threatened closure over sanctions and the U.S. withdrawal from the Iran nuclear deal, but never followed through. The pattern shows that while Iran uses the threat strategically and rhetorically, actual closure is seen as too self-destructive.
Will Iran Actually Do It This Time?
Three primary deterrents have historically prevented Iran from closing the Strait:
China's Interests: As Iran’s top oil customer, China would oppose any move that disrupts its energy imports.
Diplomatic Fallout: Straining ties with Oman and GCC states could isolate Iran further.
Domestic Repercussions: Economic damage from lost oil revenues and higher domestic prices could destabilize the regime.
Yet, the U.S.'s direct military engagement on June 22 has altered the strategic deterrent equation. Experts warn that if Iran feels cornered, it may escalate in unconventional ways, including temporary disruption of maritime traffic.
At present, around 50 large oil tankers are navigating the Strait, and global markets are on edge. The closure, even if partial or symbolic, could send oil prices skyrocketing, impact inflation, global trade, and supply chains—with countries like India among the hardest hit.
Final Thoughts The Strait of Hormuz is more than just a narrow waterway—it is a global energy lifeline. While Iran’s threat to close it remains credible and alarming, historical patterns and geopolitical constraints suggest that a complete shutdown is still unlikely. However, temporary disruptions, increased shipping risk, and price volatility are very real possibilities in the immediate future. For countries like India, this is a moment to strengthen energy resilience, diversify sources, and brace for economic ripples that may follow from thousands of miles away. |
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