In this photo illustration, the Brent crude oil price chart for the past week is displayed on a mobile screen. Prices fluctuate in Brussels, Belgium, March 2, 2026, amid concerns about escalating conflicts involving Iran and global supply disruptions.
Jonathan Ra | Null Photo | Getty Images
Despite its leanings toward the United States, India is increasingly finding that U.S. policy works against it, especially on issues of energy security. A war with Iran will only make the problem worse.
To put pressure on Iran after peace talks broke down, the United States on Monday began blocking ships from entering and leaving Iranian ports through the Strait of Hormuz, one of the world’s most important oil checkpoints.
Experts said the move was a blow to New Delhi, which had just imported Iranian crude oil for the first time in seven years as it scrambled to meet energy needs amid the Iran war. The burden was compounded by the expiration of a U.S. exemption allowing countries to buy Russian crude oil on April 11, removing another key energy source while global markets remain tight.
Mukesh Saadeb, chief oil analyst at energy intelligence firm XAnalysts, told CNBC that India is facing increasing supply strains “due to the loss of Iranian barrels and the inability to obtain Russian barrels.”
India imports more than 85% of its crude oil demand (approximately 5.5 million barrels per day), making it the world’s third largest oil importer. Saadeb said the country has already lost about 3 million barrels of oil per day that previously passed through the Strait of Hormuz, forcing refineries to scramble for alternative supplies, particularly from Russia.
Saadeb said India would be in a much more vulnerable position if oil supply disruptions continued, adding that unlike China, which has around 300 days of oil reserves, India’s reserves of around 160 million barrels give it only a limited buffer of around 30 days against prolonged supply shocks.
Although the fuel pumps are not running dry, the effects of the Middle East conflict are already being felt in key macroeconomic indicators. India’s private sector activity slowed to its lowest level since October 2022 in March due to weak domestic demand, according to HSBC’s Purchasing Managers’ Business Index update last month.
Companies surveyed cited conflicts in the Middle East, volatile market conditions and rising inflationary pressures as factors weighing on growth. Days later, India’s finance ministry also warned that its growth forecast of 7.0% to 7.4% for the fiscal year ending March 2027 faced a “significant downside risk” due to rising energy costs and supply chain disruptions related to the Iran war.
Strategic autonomy?
The current crisis highlights broader challenges for India as it seeks to balance economic and energy demands with U.S. strategic expectations. Experts say New Delhi has long championed strategic autonomy, particularly in energy security, but recent U.S. actions have increasingly narrowed its room for maneuver.
Last year, the US government imposed a 25% tariff on Indian exports and accused New Delhi of indirectly financing Russia’s war in Ukraine by importing Russian crude oil at a discount. To secure a trade deal with the United States, India subsequently cut oil purchases from Russia and increased imports from the Middle East.
That strategy unraveled when war broke out in the region, disrupting supplies in the Middle East and pushing India back to Russian crude amid rising fuel prices and tight global markets, but the U.S. exemption is set to expire this month.
“I feel sorry for the Indian government,” Sameer Kapadia, managing principal at Vogel Group, told CNBC’s Inside India. He added that Indian policymakers are frequently told by the US government whether or not they can buy energy supplies from Russia or Iran.
“They are currently on a seesaw trying to balance the expectations of the United States,” Kapadia said. “There is no easy way out for India.”
India bought 1.5 million barrels per day of Russian crude oil in March after the US offered India a special 30-day exemption to allow it to resume purchases, according to data shared by energy information firm Rystad Energy. A week later, the U.S. government temporarily allowed all purchases of stranded Russian oil and suspended sanctions imposed after Russia’s invasion of Ukraine in an effort to stabilize energy markets.
The authorization expired on April 11, and experts say the expiration could push up oil prices and force the U.S. government to extend the exemption to cool the market.
“The market is already tight and India is hopeful that this exemption will be extended,” said Pankaj Srivastava, senior vice president at energy research firm Rystad Energy.
For now, the government is trying to downplay the immediate risks. “All refineries are operating at high production capacity and crude oil stocks are sufficient,” the Ministry of Petroleum and Natural Gas said on Monday. The department did not respond to CNBC’s request for further comment.
