The next oil shock won't shake India like in the past. Story of a 90-day shift

The renewed US-Iran military confrontation has once again thrust the Strait of Hormuz into the centre of the global energy crisis, with fresh American strikes, Iranian retaliation, repeated threats to shut the strategic waterway and another attack on a merchant vessel carrying Indian seafarers, underscoring just how fragile one of the world's busiest oil chokepoints has become. For India, however, the latest crisis is unfolding very differently from the one that triggered months of fuel shortages globally.

This is a story of how India diversified its crude imports, expanded spot-market purchases and reduced dependence on long-term Gulf contracts in the last 90 days. With the shift, India is better placed than it was in March to deal with global energy disruptions. The process to armour-clad energy security is still on.

After disruptions to oil and gas supplies in March exposed the risks of relying heavily on the Gulf, New Delhi has quietly begun reshaping its energy security strategy. State-owned refiners have diversified crude purchases beyond the Middle East, increased spot-market buying, expanded imports from suppliers such as Russia, the United States and West Africa, and sought more flexible supply arrangements that reduce dependence on any single region.

The strategy is designed to cushion India against geopolitical shocks exactly like the one now again unfolding in the Gulf. While the Strait of Hormuz remains a critical artery for global energy trade and any prolonged closure would still send oil prices soaring, India's broader supplier base and more flexible procurement model are expected to make it better equipped to withstand supply disruptions than it was just a few months ago.

The shift gathered pace after state-owned refiners reviewed their procurement strategy following repeated attacks on commercial shipping and disruptions linked to the US-Israel-Iran conflict. According to Bloomberg, refiners have reduced their reliance on long-term contracts with traditional Middle Eastern producers and are increasingly turning to short-term purchases and broader supply agreements with global trading houses that source crude from multiple regions, helping ensure more reliable deliveries during geopolitical crises.

INDIA'S HISTORIC DEPENDENCE ON MIDDLE EASTERN OIL

India is one of the world's most import-dependent energy consumers, importing nearly 90% of its crude oil requirements, or around 5 million barrels per day, according to Reuters.

For decades, much of this oil has come through long-term contracts with major Middle Eastern producers such as Saudi Arabia and Iraq. Under these annual or multi-year agreements, state-owned refiners receive fixed volumes of crude every month, with prices linked to global benchmarks such as Brent or Dubai crude. The arrangement provides India with reliable supplies while guaranteeing producers a stable buyer.

According to Bloomberg, state-run refiners including Indian Oil, Bharat Petroleum and Hindustan Petroleum secure more than half of their crude requirements through such contracts, with the remainder purchased on the spot market.

It is these long-term contracts that are now on the chopping block. The Iran War exposed India's heavy reliance on the Middle East for energy imports. Disruptions in the global flow of oil from the Middle East as a consequence of the war lead to supply shortages, higher prices, and significant losses for refiners.

India's own domestic reserves proved insufficient to ride out the storm, and India had to mount a massive diplomatic effort to safeguard energy supplies. This saw External Affairs Minister S Jaishankar visiting the United Arab Emirates in April, followed by Prime Minister Narendra Modi a few weeks later. Ajit Doval, the national security adviser, made a trip to Saudi Arabia the same month, while Oil Minister Hardeep Puri visited Qatar to seek supplies.

The push to secure India's economic and energy interests has since expanded beyond the Gulf. Commerce and Industry Minister Piyush Goyal is now on a five-day visit to Spain, Belgium and Finland to deepen trade and investment ties, with discussions spanning renewable energy, advanced manufacturing, semiconductors, clean technologies and critical industrial supply chains.

The visit reflects New Delhi's broader strategy of reducing vulnerabilities exposed by recent geopolitical crises by strengthening partnerships with a wider network of countries and building more resilient supply chains.

WHY RUSSIAN OIL PURCHASES MIGHT NOT SATISFY INDIA'S DEMAND

While the Middle East has traditionally been New Delhi's primary source of crude oil, India has increasingly relied on Russian imports since 2022.

This shift was largely driven by Russia's invasion of Ukraine. As Western nations, particularly members of the European Union, curtailed purchases of Russian oil and gas in favour of Middle Eastern alternatives, Moscow began offering its crude at steep discounts. India, facing higher Middle Eastern oil prices due to this rising Western demand, seized the opportunity. The US tacitly encouraged these purchases to prevent a catastrophic spike in global oil prices.

The US-Iran conflict further accelerated this shift, thanks to disruptions to global energy flows caused by the temporary closure of the Strait of Hormuz and attacks on oil infrastructure.

Bloomberg recently reported that temporary US waivers allowing purchases of Russian crude have provided some relief. Ship-tracking data from LSEG and Kpler, cited by Reuters, showed that Indian refiners imported around 2.7 million barrels per day (bpd) of Russian oil in July, up from 2.13 million bpd in May.

However, the surge in Russian imports has not stopped Indian refiners from seeking to diversify their suppliers. Much of the Russian crude purchased in May and June came from cargoes already at sea. More importantly, Russia's own ability to sustain exports has come under increasing pressure from the war in Ukraine.

In recent months, Ukraine has intensified drone strikes on Russian energy infrastructure, targeting refineries, oil depots and loading facilities across the country, especially oil terminals on the Baltic coast like Primorsk which is one of its largest oil export facilities. One such attack in June set a refinery on fire near Moscow, roughly 15 km from the Kremlin.

These strikes have contributed to fuel shortages across Russia, with Reuters reporting that petrol was being rationed in parts of Russian-occupied Ukraine, Crimea, southern Russia and Siberia. President Vladimir Putin also acknowledged that Ukrainian attacks had disrupted domestic fuel supplies, while Reuters reported that Moscow was considering importing petrol to ease the shortages.

These imports have already started with multiple countries dispatching fuel shipments to Russia, including India, with Reuters reporting that New Delhi has sold Moscow between 60,000 to 70,000 metric tonnes of gasoline, citing industry sources.

WHAT IS INDIA'S OIL DIVERSIFICATION STRATEGY?

The first part of India's oil diversification strategy is a shift in suppliers. According to the Bloomberg report, Indian refiners are now actively planning to take advantage of new supply from countries such as Guyana, Brazil, and the US.

This shift was already underway as early as April, when Bloomberg, citing data from Kpler, reported that India imported an estimated 12.51 million barrels of Venezuelan crude that month. This marked the highest volume of oil from Venezuela to arrive in India in one month since February 2020, and would mark the first import from the South American producer since May 2025.

The second is a shift away to short-term contracts and spot purchases from the oil market. While Indian refiners have historically relied on long-term contracts signed with foreign suppliers to meet their crude needs, Bloomberg reported that those refiners are now planning to trim the volume of crude acquired through these contracts and rely more on spot market purchases.

For context, a spot market purchase in the oil industry is essentially an open market transaction, where crude oil already onboard ships is bought and sold for immediate or near-immediate delivery (usually within a few weeks). Unlike long-term contracts that bind a buyer and seller together for months or years, a spot deal is a one-time, flexible agreement between two parties based entirely on the market conditions of that specific day.

The third, is partnering with commodity trading firms to purchase crude instead of directly approaching foreign suppliers. This shift was already underway starting from February this year, when Reliance, the operator of Jamnagar Refinery (the world's largest such complex) purchased at least two million barrels of Venezuelan crude from commodity trading firms, Trafigura and Vitol.

Similarly, state-owned oil processor, Bharat Petroleum, signed a deal with Trafigura for the supply of Iraqi crude which began in April this year, while Bloomberg reported that India's largest oil processor, Indian Oil, was setting up a trading desk in partnership with Vitol Group.

For context, Vitol Group, is one of the world's largest oil trading firms. As of their latest annual reporting, the company trades an average of 8 million barrels per day (mbpd) of crude oil and products, which amounts to nearly 400 million metric tons annually.

These trading firms source and stockpile crude from producers around the world and can redirect supplies quickly during disruptions, giving Indian refiners greater flexibility and reducing their vulnerability to future geopolitical shocks like the Iran war.

Should these proposed shifts take place, it will end up being one of the most significant changes in India's energy procurement strategy in years. Whether such a strategy can reduce New Delhi's vulnerability to disruptions that impact the global flow of energy, remains to be seen.

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