Disruption at Strait of Hormuz: India covered, for now, Pg14

Key Highlights:

• Conflict between Iran, US, and Israel has disrupted oil and gas flows through the Strait of Hormuz.
• Iran's Islamic Revolutionary Guards Corps (IRGC) signaled closure of the strait, though no official declaration was made.
• Suspension of shipments has led to hundreds of tankers anchoring in the Gulf waters.
• India, the world's third-largest oil consumer, relies on the strait for a significant portion of its oil and gas imports.
• Brent crude prices have risen to over $72 per barrel due to escalating tensions.

Detailed Insights:

• The Strait of Hormuz is a critical chokepoint for global energy supply, handling approximately one-fifth of global liquid petroleum consumption and global LNG trade.
• Around half of India’s total oil imports, roughly 2.5-2.7 million barrels per day, pass through the strait from countries such as Iraq, Saudi Arabia, the UAE, and Kuwait.
• India maintains crude inventories of over 10 days, along with around a week’s worth of fuel stocks, and can draw on its strategic petroleum reserves to cover potential shortfalls.
• Diversification options for India include increased sourcing from Russia, the US, West Africa, and Latin America.
• LPG imports are a bigger vulnerability for India, as the country imports 80-85% of its LPG needs, with the majority sourced from Gulf suppliers and almost entirely transiting Hormuz.
• Around 60% of India’s LNG imports pass through the strait, and like LPG, there are no structural buffers in place.
• Every $1 per barrel increase in oil price could raise India’s oil import bill by $1.8-2 billion on an annualized basis.

Key Concepts Involved:

• Strait of Hormuz: A narrow waterway between Iran and Oman connecting the Persian Gulf with the Gulf of Oman and the Arabian Sea.
• Strategic Petroleum Reserves: Stockpiles of crude oil maintained by a country to safeguard against supply disruptions.
• Brent Crude: A major benchmark price for purchases of oil worldwide.