This is a material global risk event. Approximately 20 million barrels per day (mb/d) of crude oil and 86 million tonnes per annum (mtpa) of LNG pass through the SoH, representing 27% of global oil trade and 20% of global LNG trade.
FinTech BizNews Service
Mumbai, March 4, 2026: In view of the Heightened geopolitical tensions in the Middle East (ME), Sumit Pokharna, VP Fundamental Research, Kotak Securities, has shared his views on Impact of the War in the Middle East on India’s Oil and Gas Sector:
The sharp escalation in tensions between the United States and Israel on one side and Iran on the other, coupled with reported damage to critical regional energy infrastructure, has resulted in one of the most severe supply disruptions in recent history.
The Islamic Revolutionary Guard Corps (IRGC) has announced the closure of the Strait of Hormuz (SoH), warning that any vessel attempting to transit the waterway would be targeted. This is a material global risk event. Approximately 20 million barrels per day (mb/d) of crude oil and 86 million tonnes per annum (mtpa) of LNG pass through the SoH, representing 27% of global oil trade and 20% of global LNG trade.
While a prolonged shutdown appears unlikely, even a disruption lasting a few weeks could cause significant market dislocation. Early signs of stress are already visible. Qatar, one of the world’s largest LNG exporters, has reportedly shut its LNG plants, exacerbating concerns over supply continuity.
India: Structurally Exposed, Tactically Vulnerable
India faces elevated exposure to this disruption, with an estimated 50–55% of its crude oil and LNG imports transiting the SoH. Strategic petroleum reserves cover only 8–9 days of oil demand, and there are no comparable strategic reserves for natural gas.
If the disruption persists beyond the very short term, supply-side stress will intensify rapidly. We expect gas supplies to be rationed in the near term.
Sectoral Impact: Margin Compression and Volume Curtailment
Oil Refiners / OMCs
While physical crude volumes may be sustained through alternate sourcing, the cost structure will deteriorate sharply:
With retail fuel prices effectively frozen, higher feedstock and logistics costs will compress marketing margins. Earnings visibility weakens meaningfully under this scenario.
Gas Value Chain (GAIL/PLNG)
Gas transmission and LNG importers are likely to face curtailed volumes and higher landed LNG costs, pressuring both throughput and margins.
City Gas Distribution (CGD)
CGD companies may experience:
Broader Market Context: Some Cushion, But Not Immunity
It is important to note that global oil markets were previously in an oversupplied position, which may cushion a sharp reduction in Iranian exports. Additionally, eight OPEC countries have agreed to increase production by 206 kb/d from April 2026, following a three-month pause (versus a 137 kb/d increase during Oct–Dec 2025).
However, logistical chokepoints are binary risks—when transit is blocked, spare production capacity offers limited immediate relief.
Investment View: Risk-Reward Skews Negative
Given:
We maintain SELL ratings on:
Bottom Line
This is not merely a price shock—it is a transit shock.
Even a temporary closure of the Strait of Hormuz can disrupt trade flows, inflate costs, strain margins, and expose structural vulnerabilities in import-dependent economies like India.
In the near term, resilience will be tested. In equities, caution remains warranted.
