Model Answer

The Strait of Hormuz carries nearly one-fifth of global oil trade, making it one of the world's most critical maritime chokepoints. The recent U.S. decision to reimpose a blockade on Iranian shipping and announce a 20% transit toll has reignited concerns over freedom of navigation, energy security and geopolitical rivalry.

Implications for global trade

1. Disrupts energy security by increasing uncertainty over oil and LNG supplies. e.g.: Hormuz is the principal export route for Gulf producers.
2. Raises shipping and insurance costs, increasing global inflationary pressures. e.g.: Higher war-risk premiums on commercial vessels.
3. Challenges freedom of navigation, a cornerstone of international maritime law under UNCLOS.
4. Accelerates trade diversion as countries seek alternative routes and energy sources. e.g.: Red Sea, pipelines and strategic reserves.
5. Increases market volatility, affecting commodity prices and investor confidence.

Implications for India

1. Threatens energy imports, as over 60% of India's crude oil imports originate from West Asia.
2. Widens the current account deficit through higher import bills and fuel inflation.
3. Raises freight costs, affecting exports and overall trade competitiveness.
4. Complicates India's strategic balancing between the U.S., Gulf partners and Iran, particularly regarding Chabahar Port.
5. Highlights the need for maritime preparedness, reinforcing initiatives such as SAGAR and Indo-Pacific maritime cooperation.

Way Forward

1. Diversify energy sources and expand the Strategic Petroleum Reserve.
2. Strengthen maritime domain awareness through the Indian Navy and IFC-IOR.
3. Support a rules-based maritime order through diplomacy and adherence to international law.

The Strait of Hormuz is not merely an energy corridor but a strategic lever in great-power competition. For India, ensuring secure sea lanes, diversified energy partnerships and a rules-based maritime order remains essential for safeguarding its economic and strategic interests.