When the Strait closed: India’s energy test and what comes next

India’s response was immediate, structured and multi-dimensional and rested on three broad pillars.

- RAJIV MEMANI

India began 2026 on a strong footing.

Growth was running at over 7.5%, inflation was below 3%, fiscal consolidation was under way, IPO fund-raising was robust, and consumption and services exports continued to support momentum. There were concerns around the currency and a flat stock market, partly because Indian equities had limited exposure to the global AI trade, but the broader economy was still moving with confidence, helped by continuing progress on trade agreements and investment sentiment.

Then came an energy shock that few countries had fully planned for. The conflict in West Asia and the closure of the Strait of Hormuz tested not only India’s fuel supply lines but also its ability to protect ordinary citizens from a global price and confidence shock. That is the part of the story that deserves to be told more fully.

AN UNANTICIPATED SHOCK

The Strait of Hormuz is the single most consequential chokepoint in the global energy system. India imports approximately 87% of its crude oil, around 50% of its natural gas and about 55% of its LPG. Before the conflict, 46% of India’s crude oil imports, 93% of its LPG and 55% of its LNG moved through that narrow waterway. When it closed, the risk was not theoretical. LPG supplies were down by nearly 30% at one point because of import cuts, India’s crude basket rose from about US$70 to US$120 a barrel, and the bigger danger was a potential loss of confidence among businesses and households.

It was not only India that was caught off guard. Several Asian economies found themselves exposed to the same chokepoint. Many IEA member countries had to release strategic reserves, allies activated bilateral supply swaps in haste. The blockade exposed over-reliance on a single chokepoint and an almost universal absence of pre-planned response playbooks.