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Informist, Sunday, Mar. 1, 2026

By Pallavi Singhal

NEW DELHI – India's crude oil freight and insurance costs are set to rise as flows through the Strait of Hormuz are disrupted, with about 2.6 million barrels per day of the country's imports passing through the chokepoint, Sumit Ritolia, lead research analyst, refining and modelling, at global trade analytics firm Kpler, said.

Iran has shut the Strait of Hormuz, a narrow waterway that connects the Persian Gulf with the Indian Ocean. The strait handles about 20% of the world's seaborne oil shipments, and insurers have cancelled or sharply repriced war-risk cover for vessels in the Gulf, according to news reports.

The disruption is likely to immediately add a geopolitical risk premium to Brent crude prices, pushing up India's import bill even before physical shortages emerge, Ritolia said. Higher freight and insurance rates, potential short-term supply tightness, and pressure on the rupee and fiscal balance would follow if tanker traffic is constrained.

About half of India's crude imports--primarily from Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait--currently pass by Hormuz, making the country particularly vulnerable to shipping bottlenecks and surging freight rates.

"A blockade is likely to trigger a sharp geopolitical risk premium, driving Brent prices higher," Ritolia said. "For India, this would translate into higher import costs and freight and insurance spikes."

The disruption comes against the backdrop of already elevated tanker costs. West Asia-to-Asia freight rates for very large crude carriers have climbed to their highest level since 2020 as tensions between the US and Iran simmered, highlighting the incentive for shippers to avoid the region and use other routes, Reuters reported.

However, a prolonged and complete blockade remains a low-probability scenario, given the economic dependence of Gulf oil producers, including Iran, on uninterrupted export revenues, Ritolia said.

To secure supplies, India could draw upon its strategic petroleum reserves, step up spot purchases from regions outside the Persian Gulf, and deepen term contracts with alternative suppliers.

According to Ritolia, diversification options include higher sourcing from Russia, using eastern routes or cargoes already "on water" near India, as well as the US, West Africa, and Latin America. While these alternatives would help to maintain supply continuity, some of them involve longer voyages and higher freight costs, increasing landed crude costs in the near term, he said.

West Asian cargoes typically arrive in India within a week, making them logistically efficient and strategically important. Ritolia also noted that several Russian cargoes are currently floating in the Indian Ocean and Arabian Sea due to reduced Indian imports in recent months, effectively acting as near-term optional supply.

In case of constraints on West Asian imports, Indian refiners--potentially with policy backing--could pivot to Russian barrels relatively quickly, providing a buffer against short-term geopolitical shocks, he said.

Unless the conflict abates quickly, oil prices are expected to shoot up when markets reopen Monday, analysts have said. The benchmark Brent crude had already climbed in recent weeks to over $70 a barrel, its highest level since August, as investors positioned for the possibility of a broader military confrontation in the region.  End

US$1 = INR 90.97

Edited by Rajeev Pai

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