India is better cushioned for Hormuz’s reclosure but the risk premium is climbing again

India is unlikely to run short of fuel even after Iran’s latest closure of the Strait of Hormuz — but it may have to pay more. Crude oil supplies have been secured until August and liquefied petroleum gas (LPG) imports have been tied up, but the risk premium is increasing on crude oil, Business Standard reports.

What changed? Iran closed the Strait of Hormuz on 11 July after a fresh escalation with the US. Traffic through the waterway was nearly halted on Sunday, with only two vessels approaching the route.

The supply cushion: India entered the latest disruption with 60 days of crude oil and LNG stocks and 45 days of LPG stocks as of 2 July, Petroleum and Natural Gas Minister Hardeep Singh Puri said. Crude cargoes have already been secured till August, while LPG imports have also been tied up. Any disruption to LNG supplies is also expected to be manageable.

At the same time, the government also doesn’t plan to immediately reinstate emergency restrictions on LPG or LNG allocations that were eased after the previous Hormuz disruption.

Price risk remains: While fuel availability is not in immediate concern, New Delhi may have to pay a higher risk premium for future supplies. The crude risk premium could rise by USD 10-15 / bbl, taking prices to USD 80-85 / bbl, Hitesh Jain, lead analyst at Indian brokerage Yes Securities, told the daily. This could raise procurement prices for September or October deliveries, keeping freight and logistics costs stretched for India. Brent rose to USD 87 / bbl, its highest level since 19 June.

Why it matters: India’s diversified crude sourcing — helped by Russia, the US, and other non-Opec suppliers — has reduced its Gulf dependence, giving refiners more room to manage delayed shipments or higher shipping costs. But a prolonged Hormuz closure yet again could still inflate India’s energy import bill and feed into inflation, while securing LNG cargoes will remain a crucial watchpoint.