The Strait That Shakes Prices: Impact of the Hormuz Disruption on Inflation in India

(Arya Roy Bardhan – Observer Research Foundation) On 28 February 2026, coordinated United States (US) and Israeli airstrikes on Iran triggered the closure of the Strait of Hormuz, through which one-fifth of the world’s seaborne crude oil and liquefied natural gas (LNG) had flowed before the crisis. The International Energy Agency has called it the largest supply disruption in the history of the global oil market. Traffic through the strait collapsed from over 130 daily ship transits to fewer than 10. The Indian crude oil basket nearly doubled in a single month, from US$69 per barrel in February to US$126 in March, peaking at US$157. Qatar declared force majeure on LNG exports after missile strikes damaged its Ras Laffan facility. Global urea prices jumped 50 percent, threatening the spring planting season in the Northern Hemisphere. India is among the most exposed large economies across the globe. It imports 88 percent of its crude oil, with roughly half of this volume typically arriving via the strait. Over 60 percent of household LPG is imported, and 90 percent of those imports transit Hormuz. More than half of India’s LNG arrives from Qatar and the UAE through the same route. The Government of India responded with excise duty cuts on motor fuels, a Natural Gas Control Order rationing supply, customs duty exemptions on petrochemical products, and bilateral negotiations with Iran for safe passage of Indian-flagged vessels. Despite these measures, however, inflationary pressures are building, and the imperative for policymakers is to know which sectors are most vulnerable and through which channels the shocks are transmitting. Current forecasts from investment banks and rating agencies project Indian CPI inflation of 5–6 percent in Q2–Q3 2026. However, these forecasts share three limitations: they are aggregate (i.e., they cannot tell which sectors are driving the increase), opaque (they are based on proprietary models that cannot be independently verified), and they miss the amplification structure (how a primary energy shock cascades through petrochemicals, fertilisers, agriculture, and food processing, accumulating at each stage). This report addresses these gaps. – The Strait That Shakes Prices: Impact of the Hormuz Disruption on Inflation in India