India moves to multi-pronged energy solution: Gulf bypass to secure LPG, oil storage, and LNG amid Hormuz blockade

India is fighting the oil shock from the ongoing regional war on every front, all at once: New Delhi is moving cargoes through the Strait of Hormuz under naval cover, locking in long-term Gulf supply, passing rising fuel costs to consumers, and ramping up domestic substitution. As the shock increasingly shows up in the macro numbers, the government’s response is now evolving into a multiple-track, simultaneous move that’s increasingly built around the Gulf.

The macro picture is biting

The INR’s oil problem is now showing up in the exchange rate: The currency slipped another 0.2% today, changing hands at 95.94 / USD 1 and was on course for an over 1% weekly drop, Reuters reports. State-run banks’ USD sales helped keep the INR just off yesterday’s record low of 95.95 / USD.

India imports about 90% of its oil needs and 50% of its gas requirements, leaving the INR exposed to Gulf supply disruption and higher energy prices. Brent rose more than 1% to USD 107 / bbl after US President Donald Trump said he would not be “much more patient” with Iran, while the US-Iran ceasefire remains fragile. India is also facing a third straight year of balance-of-payments pressure as oil costs and portfolio outflows strain both the current and capital accounts.

The cushion: The Reserve Bank of India (RBI) has sold FX reserves and used regulatory measures to slow the INR’s fall. Higher US yields added another layer of pressure, with the 10-year US bond yield rising to 4.53% — its highest in a year — as energy-driven inflation concerns fed expectations of a Federal Reserve rate hike this year. Barclays expects policymakers to keep curbs on non-essential consumption while looking for ways to attract USD inflows; interest rate swap markets are pricing in about 90 bps of RBI hikes over the next 12 months, though Barclays itself expects rates to remain on hold through 2026.

Cargoes moving under cover

The most immediate way to relieve that pressure is to keep cargoes physically moving, switching up its Hormuz workaround into state-backed transit support. India-bound liquefied petroleum gas tanker NV Sunshine is crossing the Strait of Hormuz with support from multiple agencies, including the Indian Navy, the Economic Times reports, citing unnamed sources. The vessel is the 15th India-bound LPG ship to move through the chokepoint. LPG is a household fuel in India, making safe passage through Hormuz part of New Delhi’s broader energy-security response rather than a pure shipping problem.

The push is wider than one vessel: Two more India-bound LPG carriers — Symi and NV Sunshine — appear to have crossed the strait, with Symi emerging in the Gulf of Oman after going dark and NV Sunshine following a few hours later, Bloomberg reports. NV Sunshine loaded LPG at the UAE’s Ruwais refinery and switched its listed destination from Mangalore to Kandla. Symi is carrying fuel from Qatar’s Ras Laffan to Kandla. Their passage brings the number of large oil, fuel, and gas vessels that have crossed Hormuz since Sunday to 10.

The escalation curve: Earlier this week, UAE-managed LPG carrier Tara Gas sailed through Hormuz while broadcasting Indian ownership and crew — indicating that Indian linkage was used as commercial and diplomatic cover. NV Sunshine takes the same logic a step further, with Indian agency and naval support behind the transit.

Iran has signaled room for diplomacy, with Deputy Foreign Minister for Legal and International Affairs Kazem Gharibabadi telling ANI that the situation in the strait would improve once peace is established, and that Iran would welcome any Indian initiative to reduce regional tensions. The test now is whether India can keep moving cargoes vessel by vessel without widening the security risk. If the model holds, Gulf-based ship managers may lean more on Indian-linked ownership, crew and routing structures as practical cover through the chokepoint.

Locking in the Gulf

The structural layer of India’s response to the energy crunch shows in two parallel moves with the UAE and Oman, which together make the GCC more of a physical buffer against Hormuz risk for New Delhi. India and the UAE are set to finalize pacts on cooking gas supply and strategic petroleum reserves during Narendra Modi’s UAE visit today, Hindu Businessline reports, with talks between Modi and UAE President Mohamed bin Zayed Al Nahyan coming as Gulf shipping routes remain volatile, forcing India to reconfigure supply chains.

IN CONTEXT- India currently has 5.3 mn tonnes of strategic reserves, with plans to expand by 6.5 mn tonnes, including capacity leased to Abu Dhabi National Oil Company, strengthening integration at the infrastructure level. High-level trips to the UAE have been rare since the war escalated, making Modi’s stopover notable. The UAE is among India’s largest suppliers of crude and gas with the two sides signing a USD 3 bn LNG pact as recently as January, and the UAE — following its Opec exit at the start of the month — is pursuing a more independent energy policy aligned with long-term partners like India.

The longer play is a subsea pipeline, with India ramping up plans for a USD 4.8 bn deep-sea pipeline from Oman to Gujarat, designed to bypass the Strait of Hormuz entirely, Economic Times reports, citing unnamed sources. The proposed 2k km Middle East-India Deepwater Pipeline would deliver stable gas flows directly, reducing reliance on liquefied natural gas (LNG) shipments exposed to geopolitical volatility. With nearly two-thirds of India’s LNG imports transiting Hormuz, a fixed subsea link would anchor supply Oman, the UAE, Qatar, and beyond to shift towards long-term, price-stable supply.

Taken with the UAE energy pact, the pipeline sends the message that the GCC is becoming the infrastructure layer through which India secures energy and absorbs shocks.

The pump finally moves

Meanwhile, at home, India’s state-run refiners hiked gasoline and diesel prices by over 3% today — the first move in four years that essentially sheds its long-standing policy of shielding consumers from global oil volatility, Bloomberg reports.

The rates are highest since May 2022 bringing diesel to INR 90.6 (USD 1.09) per liter and petrol to INR 97.7 (USD 1.1). This comes on the back of crude hovering above USD 106 / bbl amid the war. With inflation risks and the INR touching record lows, New Delhi is gradually shifting the burden back to consumers while prepping the ground for further increases.

Still, only partial: The increase remains modest relative to a near 50% rise in global crude prices, leaving state-run refiners — Indian Oil, Bharat Petroleum and Hindustan Petroleum — still absorbing losses estimated at around INR 10 bn (USD 104 mn) daily. A gap of INR 15-20 (USD 0.18-0.24) per liter persists, making the rate only incremental.

The homegrown substitution play

The government approved a INR 375 bn (USD 3.9 bn) scheme to scale up coal gasification, according to a press release, in a clear directive to reduce dependence on imported fuels. The federal cabinet-cleared program will convert domestic coal into synthetic gas for power, fertilizer, and petrochemical use — directly substituting imports of LNG, urea and methanol. The plant aims to gasify 75 mn tonnes of coal annually, backed by state support covering up to 20% of plant costs.

Why it matters for the corridor: Every unit of gas produced domestically is one less cargo India needs to source from the Gulf. Lower import dependence could temper long-term demand from India for Gulf gas, even as short-term linkages deepen across LPG and the proposed Oman pipeline. With LNG imports exposed to the Hormuz escalations, redirecting India’s 400 bn tonne coal reserves into industrial feedstock is the long-horizon hedge. The result is that India is simultaneously securing the corridor while reducing its exposure to it.