India’s Modi reaches out to Iran as energy crunch fears grip the South Asian nation
Liberian-flagged crude oil tanker Shenlong Suezmax successfully docked at Mumbai Port after crossing the high-risk Strait of Hormuz amid the intensifying West Asian conflict in Mumbai, India, on March 11, 2026.
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Indian Prime Minister Narendra Modi called Iranian President Massoud Pezeshkian just hours after Tehran’s new supreme leader vowed to keep the Strait of Hormuz closed as New Delhi pushes to reduce energy supply risks.
It was Modi’s first appeal to Iran since the start of the war, at a time when Iran, the world’s third-largest oil importer and second-largest consumer of liquefied petroleum gas, is grappling with rising energy costs and panic buying amid supply shortages due to the closure of the critical waterway.
India relies on supplies from the Strait of Hormuz for about 50% of its crude oil needs, according to Citi. imports The majority of LPG, the primary cooking fuel used by commercial establishments and homes, passes through this route.
“With the safety and security of the citizens of India unimpeded “Transit of goods and energy remain India’s top priorities,” said Modi, sharing the details of his meeting with the Iranian leader on the X channel.
While there is “sufficient stock” at gasoline pumps, there is panic buying in LPG, causing an increase in supply restrictionsGovernment officials said this at a press conference on Thursday.
The government has even directed pollution control boards to allow fuels such as kerosene, biomass and coal to be used by the hospitality sector, as the world’s most populous country prioritizes LPG supply to homes.
Approximately 330 million households and over 3 million businesses in India to use LPG cylinders. According to the statement shared by the National Restaurant Association of India with CNBC, many restaurants are closing or reducing their menus due to the shortage of LPG cylinders for commercial use.
“India needs more oil and gas,” Goldman Sachs’ Nikhil Bhandari said on CNBC’s “Squawk Box Asia,” adding that the country is highly dependent on resources from the Strait of Hormuz and has a “much lower” inventory cushion than other North Asian markets.
increasing costs
Citi estimates an “upside risk” of 50 to 75 basis points for its forecast for Indian consumer inflation of 4% for the fiscal year ending March 2027.
If oil prices remain around $90 to $100 per barrel, fuel prices could rise by 5 rupees per liter to 10 rupees per liter, which alone could lead to an impact of up to 50 basis points on consumer inflation, the brokerage said in a note on Thursday.
Meanwhile, global brokerage Nomura raised India’s consumer inflation forecast to 4.5% from 3.8% for the fiscal year ending March 2027 and said the crisis in commercial LPG risks pushing up the prices charged by restaurants.
India faces rising energy costs and shortages, and disruptions in supply chains could lead to “multiple sources of inflationary pressure” if they persist for more than a month, Nomura said in a note on Thursday.
While the government prioritized supply to consumers, restrictions imposed after the start of the war also restricted access for households. Urban consumers will have to wait 25 days between LPG bookings compared to 21 days ago, while rural households will have to wait 45 days.
Due to supply constraints, the government increased the price of cooking fuel by 60 rupees per cylinder, or about 6.5% for most consumers; But experts warn that ongoing election campaigns in five key states will limit the government’s ability to pass on the cost of rising fuel prices to consumers.
Meanwhile, the rupee was hovering near record lows of 92.48 against the US dollar on Friday as traders factored in the risk of oil prices remaining higher for longer.
Radhika Rao, senior economist and managing director of DBS Bank Singapore, told CNBC that India’s current account deficit could widen by 70 basis points if oil prices exceed $100 per barrel on average.
India’s current account deficit was at 1.3% of GDP as of end-December 2025, but if the deficit widens due to the pressure of rising oil prices, there will be a devaluation of its currency.
No safe passage
Data from energy intelligence firm Kpler shows that at least 130 million barrels of oil were stranded in the Middle East Gulf as of Thursday, but India could not access it due to Iran blocking trade through the Strait of Hormuz..
The country is seeking safe passage for its 28 ships, which include about 800 Indian sailors. stranded in the throat According to the country’s external affairs ministry, Indian External Affairs Minister S. Jaishankar has held several meetings with his Iranian counterpart Seyed Abbas Araghchi in recent days.
“Last one [meeting] Topics related to were discussed [the] “Security of shipping and India’s energy security,” a ministry spokesman said, adding that sharing anything beyond that would be “premature” and Indian ships were unlikely to lift the blockade.
“If Hormuz remains closed in the near term, India will be forced into a structural restructuring for which it is never fully prepared, at a cost premium it cannot afford,” said Reema Bhattacharya, head of Asia risk insight, enterprise risk and sustainability at business consultancy Verisk Maplecroft.
India currently supplies crude oil from more than 40 countries, with purchases from Russia reaching 1.46 million barrels per day in March, compared to 1 million barrels in February, according to data from Kpler.
Muyu Xu, a senior analyst at the firm, said market rumors suggest that India recently purchased Russian Urals at a premium of $5 per barrel for March and April deliveries. Dated Brent.
Bhattacharya said India “cannot realistically realign” its energy supply chains within a month or two due to global constraints and high costs.
