Will Iran-Israel War Hit Your Kitchen Budget? LPG, Oil Prices In India Under Pressure As Tensions Rise

India's energy security has come under fresh strain after the United States and Israel launched major strikes on Iran on February 28. The escalation has raised fears of disruptions in the Strait of Hormuz - one of the world's most important oil transit routes - and a possible surge in global crude prices.

For India, the main concern is not direct military involvement but the risk of an energy shock that could affect fuel prices, inflation and economic stability.

Why the Strait of Hormuz Matters to India

Iran is one of the world's largest oil and gas producers. At the same time, India depends heavily on imported crude oil, meeting nearly 90 percent of its requirement from overseas markets.

A large share of India's oil imports - mainly from Iraq, Saudi Arabia, Kuwait and the UAE - passes through the Strait of Hormuz. Globally, around 20 percent of oil and liquefied natural gas (LNG) supplies move through this narrow sea corridor.

If tensions lead to military blockades, shipping disruptions or higher insurance costs, oil prices could rise sharply. Even a modest increase in crude prices can significantly impact India's economy.

Rising Oil Prices and Economic Impact

Experts warn that if crude oil prices rise by $10 per barrel, India's annual import bill could increase by $13-14 billion. This would widen the current account deficit and put pressure on the rupee.

Higher oil prices usually lead to:

• Increased fuel costs
• Higher transport and logistics expenses
• Rising retail inflation
• Pressure on food prices

If Iran's oil production of around 3.3 million barrels per day is disrupted, prices could climb from $70 per barrel to between $76 and $81 in the short term. In extreme cases, if the conflict widens, oil prices could surge even further.

Shipping insurance premiums in the region have reportedly risen sharply due to increased war risk, adding to the cost of transporting oil.

Government Reviews Emergency Measures

Prime Minister Narendra Modi chaired a meeting of the Cabinet Committee on Security (CCS) on March 2 to review the situation. Discussions focused on:

• Securing crude oil supplies
• Monitoring shipping routes
• Assessing strategic petroleum reserves
• Ensuring the safety of Indian nationals in West Asia

Nearly nine million Indians live across West Asia, including around 10,000 in Iran and over 40,000 in Israel.

The government is also exploring alternative crude sourcing options in case disruptions intensify.

LPG Supplies Also at Risk

India's liquefied petroleum gas (LPG) imports could also be affected if tensions disrupt shipping through Hormuz. A significant portion of LPG cargoes transit through the same route.

Any delays could raise freight and insurance costs and tighten global LPG supply. Since LPG prices are linked to crude oil benchmarks, a spike in oil prices could increase subsidy burdens for the government.

Officials, however, have indicated that there is no immediate concern and that domestic consumers will be protected from sudden price shocks in the short term.

Wider Impact on Asia and Global Markets

The Strait of Hormuz is vital not only for India but also for major Asian economies like China, Japan and South Korea. Together, these countries account for the majority of oil and LNG flows through the strait.

A complete blockade could push oil prices to extremely high levels, possibly matching or even exceeding previous global oil crises.

Such a surge would affect global inflation, currency markets and trade flows worldwide.

Pressure on Clean Energy and Trade

The crisis could also slow down the movement of renewable energy equipment and critical materials, as many shipments pass through the same sea routes.

Higher oil prices increase demand for US dollars to pay for imports, which can weaken the rupee and add to imported inflation.

India's exports may also face difficulties if instability continues.

Impact on Rice and Tea Exports

The fallout may extend beyond energy. Iran is a major buyer of Indian basmati rice, accounting for about 25 percent of total exports in this category. Iraq is another key market.

Disruptions in shipping routes, payment channels or banking systems could affect rice exports worth billions of dollars annually.

Tea exports may also face delays. Any interruption in maritime routes or insurance coverage could strain exporters who are already dealing with volatile global markets.

A Reminder of India's Energy Vulnerability

The ongoing crisis highlights India's dependence on imported fossil fuels. Even though India sources crude from multiple countries - including Russia, the US, Africa and Latin America - it cannot fully avoid global price swings.

As tensions continue, policymakers are working to shield the economy from volatility. However, the situation underlines how closely India's economic growth is tied to stability in a narrow sea corridor thousands of kilometres away.

Energy security, trade flows and geopolitics remain deeply connected - and developments in West Asia will continue to shape India's economic outlook in the coming months.