The Crisis of the Hormuz Strait and Opportunities for US-India Energy

The recent restriction of passage through the Hormuz Strait has triggered an energy crisis threatening India's security and global supply chains. This crucial maritime channel, essential for the transport of oil and liquefied natural gas (LNG), has become a strategic pressure point forcing India to seek urgent alternatives.

India, Pillar of Global Energy Supply Chains

India is currently the third largest oil importer in the world, the fourth largest LNG importer, and the second largest liquefied petroleum gas (LPG) importer. Additionally, it is the fourth largest refiner and the fifth largest exporter of refined petroleum globally. According to the International Energy Agency (IEA) estimates, India will become the primary source of global oil demand growth between 2026 and 2030. However, much of the raw materials for domestic energy and refined product exports come from the Hormuz Strait or Russia, making India vulnerable to supply disruptions.

Dependence on Middle Eastern and Russian Energy

Before the restrictions on passage through the Hormuz Strait began in March, 45% of India's crude oil imports, 50% of LNG, and 90% of LPG transited through this strait. To diversify supply sources, India has increased purchases of oil from Iraq, Saudi Arabia, the United Arab Emirates, and Kuwait. However, the closure of the Hormuz Strait has created extreme pressure on Indian policymakers to find temporary solutions.

One possible alternative was Russia, but U.S. tariffs and sanctions have made this option unsustainable in the long term. After Russia's invasion of Ukraine, the G-7's program on the price cap for Russian oil brought the share of Russian oil in India's total imports to over 33% between April 2022 and September 2025. However, expanding U.S. sanctions, particularly the designation of Rosneft and Lukoil in November 2025, limited India's ability to import Russian oil, reducing the share to less than 20% in January 2026.

Temporary Solutions and the Need for Diversification

To stabilize global energy markets during the conflict with Iran, the U.S. Department of the Treasury issued temporary sanctions waivers for the purchase of Iranian and Russian oil already at sea. The Indian Oil Corporation purchased its first cargo of Iranian oil since 2019 in early April. Although Treasury Secretary Scott Bessant initially stated that the waivers would not be renewed, requests from about 10 nations led the administration to extend them. The waiver for Iran expired without renewal, while the one for Russia continues on a monthly basis, most recently extended until mid-June. This uncertainty underscores India's need to diversify towards more reliable long-term options.

The Opportunity for the United States

Relations between Washington and New Delhi have experienced significant turbulence in 2025, partly due to India's continued purchase of Russian oil and the resulting tariffs. However, India has signaled a genuine willingness to diversify its supply sources if practical alternatives exist. This presents a clear opportunity for U.S. policymakers and industry.

February's announcement of a framework for a U.S.-India trade agreement, with commitments to increase purchases of U.S. energy products, suggests significant room to further expand U.S.-India energy cooperation. India's one-year agreement to import 2.2 million metric tons of LPG from the United States in 2026, the first structured contract for U.S. LPG in the Indian market, is a step in the right direction.

Measures for a Lasting Energy Partnership

To make the U.S.-India energy partnership lasting, proactive support from both sides will be required. From the U.S. side, policymakers should consider the following measures:

• Expand agreements for U.S. LNG and LPG exports to India. The mentioned agreement covers about 10% of India's LPG demand. Long-term contracts for LNG and LPG at preferential or competitive prices could increase this share, benefiting U.S. suppliers and helping India diversify its suppliers.
• Operationalize the 2020 Memorandum of Understanding between the U.S. and India on Strategic Petroleum Reserves (SPR). Signed under the Strategic Energy Partnership, this framework has never been implemented. India's strategic petroleum reserves remain well below international standards, with the IEA estimating coverage of only seven days, far below the 90-day benchmark. The United States could support the expansion of India's SPR Phase II through technical cooperation and development financing, while negotiating long-term contracts for U.S. oil supplies to fill the expanding reserves.
• Support the resilience of India's non-Hormuz supply chains. India has temporarily diverted about 70% of its crude oil imports from the Hormuz Strait, compared to the previous 55%, primarily absorbing sanctioned Russian oil thanks to temporary U.S. waivers. The lasting structural solution requires investments in alternative infrastructure and diversification of supply sources.

The Hormuz Strait crisis represents a significant challenge for India but also an opportunity to strengthen the U.S.-India energy partnership. Through strategic cooperation and targeted investments, the two countries can work together to ensure energy security and economic stability in the Indo-Pacific region.