Red Sea Conflict: India’s Crude Oil Security Shift

Red Sea Conflict Reshapes India’s Crude Oil Security Strategy

Why in the News ?

The expanding West Asia conflict and Houthi threats to shipping through the Red Sea have raised concerns over India’s crude oil supplies. While Russian oil remains a key buffer, disruptions at major maritime chokepoints could affect global energy security, influencing investment decisions by institutional investors and fund managers monitoring energy sector risks.

Red Sea Conflict and Impact on India’s Oil Supplies:

• The conflict has expanded from the Strait of Hormuz to the Bab el-Mandeb Strait, another critical global maritime chokepoint connecting the Red Sea with the Gulf of Aden, raising non-financial risks for energy-dependent economies.
• The Houthi rebels have threatened to target Saudi Arabian oil tankers, increasing uncertainty over oil shipments passing through the Red Sea and affecting market valuation of energy companies tracked by asset managers.
• Vessel movements through the Bab el-Mandeb Strait have declined significantly, raising fears of delays in global crude oil transportation and impacting market capitalisation of shipping and energy firms listed on the National Stock Exchange.
• If shipping through the Red Sea is disrupted, tankers may be forced to sail around the Cape of Good Hope (Africa), increasing transit time by nearly four weeks, freight costs, and global oil prices, prompting international investment funds to reassess equity investment strategies in the energy sector.
• Since India imports over 88% of its crude oil requirements, prolonged disruptions in these sea routes could affect energy security, inflation, and import costs, influencing ETFs and index funds focused on emerging markets and energy sectors.

Russia as India’s Strategic Oil Buffer

• Russia has become India’s largest crude oil supplier, accounting for over 50% of India’s oil imports in June 2026, with imports reaching around 2.6 million barrels per day (bpd), a development closely monitored by exchange traded funds tracking energy commodities.
• So far, Russian crude shipments through the Red Sea have remained largely unaffected despite regional tensions, providing stability to Indian refiners and supporting sustainable business practices through reliable supply chains.
• In case Saudi oil supplies decline, Indian refiners are expected to increase purchases of discounted Russian crude while utilizing commercial crude inventories to manage temporary shortages, a strategy aligned with ethical considerations of energy diversification and social responsibility toward consumers.
• However, risks remain due to Ukrainian attacks on Russia’s Black Sea energy infrastructure, especially the Novorossiysk (Sheskharis) terminal, which handles a significant share of crude destined for India, affecting stock weights in energy-focused portfolios.
• Experts also caution that as Russian refineries resume operations, exportable crude volumes may decline, reducing the availability of discounted oil for India and prompting evolving investor preferences toward green economy companies and renewable energy alternatives addressing climate change concerns.