Strait of Hormuz on edge due to Iran-Israel war? Iran’s leverage is a cautious tale for India

Decades of shadow war between Israel and Iran, involving proxies and clandestine attacks by land, sea, air and cyberspace, is once again out in the open as the two adversaries are now engaged in a tit-for-tat conflict. The two countries have engaged in war in recent times and on Feb 28, Israel, with the help of the United States, launched a pre-emptive attack against Iran, pushing the Middle East into a renewed military confrontation and further dimming hopes for a diplomatic solution to Tehran's long-running nuclear dispute with the West. The first apparent strike happened near the offices of Iran's Supreme Leader Ayatollah Ali Khamenei. Iranian media reported strikes nationwide.

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Just moments after Israel's strike, Iran hit back and launched missiles towards Israel. Explosions rocked northern Israel as the country worked to intercept incoming Iranian missiles.


The blasts echoed just after the Israeli military said it would be using its air defence systems to bring down the Iranian fire.

As fears of the war escalating into a wider regional conflict are coming true, India is in a difficult position since it is friendly with both Israel and Iran. What makes the situation even harder for India is its dependence for energy on the region and New Delhi will keenly be watching the developments as conflict between Israel and Iran threatens important sea route for India, the Strait of Hormuz. A disruption in India's oil imports can throw the economy into disarray, spiking inflation and forcing the RBI to keep interest rates high.

Meanwhile, the Iranian-backed Houthis in Yemen have decided to restart missile and drone attacks on shipping routes and on Israel in support of Iran, the Associated Press reported. It cited two senior Houthi officials who spoke on condition of anonymity because there has been no official statement from the Houthi leadership.

One of the officials said the rebels’ first attack could happen as soon as “tonight.”

The rebels had stopped their attacks on Red Sea shipping under a deal with the Trump administration, which also led to a halt in US strikes on the Houthis. They also ended their attacks on Israel after an October ceasefire that brought major fighting in Gaza to a stop.

Also Read: Iran-backed Houthis in Yemen warn of renewed Red Sea strikes: Officials

Why the Strait of Hormuz matters

The Strait of Hormuz is widely regarded as the most critical oil transit chokepoint in the world, according to the US Energy Information Administration (EIA). Chokepoints are narrow stretches of water along major global shipping routes that play a vital role in energy supplies. If oil cannot pass through one of these routes, even for a short period, it can cause serious supply delays, increase shipping costs and push up global energy prices. In many cases, ships can take alternative routes, but these usually mean longer journeys and higher costs. Some chokepoints, however, have no realistic alternative. In the same region, the Bab el-Mandeb strait — a narrow passage linking the Red Sea to the Gulf of Aden — is already under strain due to attacks by Yemen’s Houthi movement.

The Strait of Hormuz lies between Oman and Iran. It links the Persian Gulf with the Gulf of Oman and the Arabian Sea. It is considered the most important oil chokepoint because vast quantities of crude pass through it every day. The waterway connects major oil-producing countries in the Gulf to refineries and markets across the world.

Data from the International Energy Agency show that an average of 20 million barrels per day moved through the Strait during the first ten months of 2023. Nearly 30 per cent of the world’s seaborne oil trade travels through this narrow channel. Because there are limited options to bypass it, any disruption would have major consequences for global oil markets. Around 70 per cent of the oil that passes through Hormuz is shipped to Asian countries. Only about 4.2 million barrels per day can be redirected through pipelines to avoid the Strait.

Also Read: Why has Israel attacked Iran? Nuclear fears, proxy wars and decades of rivalry explained

All liquefied natural gas exports from Qatar and the United Arab Emirates also pass through Hormuz, accounting for roughly 20 per cent of global LNG trade. There are no practical alternative routes for these volumes. Although a prolonged closure is seen as unlikely, even a brief interruption would have a noticeable impact on oil prices and supply.

The US EIA estimates that 82 per cent of the crude oil and condensate that travelled through the Strait in 2022 was destined for Asian markets. China, India, Japan and South Korea were the leading buyers, together accounting for 67 per cent of all crude oil and condensate shipments through Hormuz in 2022 and the first half of 2023.

What if shipping halts in the Strait of Hormuz?

Shipping through the Strait of Hormuz has never fully stopped. Not even during the Tanker War in 1984, when Iran and Iraq regularly attacked each other’s oil tankers, nor in more recent years when Tehran increased the seizure of vessels and harassment of commercial ships. Closing Hormuz would give Iran strong leverage over the global economy, but it would also affect countries that buy its energy, including China and India. That said, the route could still face serious disruption. Iran has recently issued fresh warnings about this possibility.

Less than two weeks ago, Alireza Tangsiri, commander of the naval forces of Iran’s Revolutionary Guard, said Israel’s presence in the United Arab Emirates was seen by Tehran as a threat and that Iran could shut the Strait if it believed it was necessary. “We can close the Hormuz Strait but are not doing so. However, if the enemy comes to disrupt us, we will review our policy,” he said.

Beyond Hormuz, there have also been cases in recent years where Iran’s own oil shipments were stopped or disrupted by Western powers. This could become another trigger for retaliation by Tehran if tensions rise further.

Why the Strait of Hormuz matters for India

When attacks by Iran-backed Houthi rebels in Yemen made the Red Sea shipping route risky, the route used to move Russian oil to Asia, India was reported to be looking at increasing purchases from countries such as Iraq. India is now reportedly rimming Russian oil buys and lookin at other markets amid pressure from the US. However, oil from Iraq, along with supplies from Saudi Arabia, Iran, the United Arab Emirates and Kuwait, is shipped to Asian markets through the Strait of Hormuz. That waterway is now also at risk because of rising tensions.

India already relies heavily on energy supplies that pass through Hormuz. About two-thirds of the country’s imported crude oil and around half of its liquefied natural gas come through this narrow channel.

In 2019, when tensions flared around Hormuz, the International Energy Agency said India was likely to be among the worst affected. At that time, two oil tankers in the strait were damaged by explosions in an incident widely seen as a reaction to tighter US sanctions on Iran. Washington blamed Tehran for the attacks, but Iran rejected the accusation. Indian vessels travelling through the area were escorted by the Indian Navy to ensure safe passage. New Delhi later held discussions with Tehran aimed at keeping the route secure. India also took part in a special meeting in Tehran in 2020 on the Hormuz Peace Initiative, which aimed to maintain stability in one of the world’s busiest and most strategically important shipping lanes during a period of heightened US-Iran tensions.

A prolonged disruption in Hormuz would pose serious risks to India’s economy, which depends heavily on imported energy. Several key industries rely on these supplies. Higher oil prices or restricted availability would likely push up inflation, which has been easing in recent months. That, in turn, could limit the Reserve Bank of India’s ability to cut interest rates, a move many expect by the end of the year. As the government provides substantial fuel subsidies, a sharp rise in oil prices could force it to review spending plans, particularly on infrastructure projects, and could also affect its fiscal deficit targets.


(With inputs from agencies)