A US-Iran peace deal expected to be signed in Switzerland on Friday could pave the way for the return of Iranian crude to India in a big way after nearly seven years.
Restoring a supplier that once accounted for 10-13% of the country’s oil imports could benefit Indian refiners in terms of lower freight costs, favourable credit terms and greater sourcing flexibility amid global market volatility.
Before US sanctions halted purchases in 2019, India was importing around 300,000 barrels per day (bpd) of crude from Iran, making Tehran one of its top three suppliers.
Iranian crude accounted for 10-13% of India’s total crude imports between FY17 and FY19. In April, Indian refiners imported 44,000 metric tonnes of Iranian crude after a temporary suspension of sanctions, underscoring the domestic oil refiners’ readiness to resume purchases if restrictions are eased.
Iranian supplies historically came with extended credit periods of 60-90 days, easing the working-capital burden on refiners and oil marketing companies.
Favourable freight economics
Freight economics are also favourable, with transportation costs from Iran to India estimated at 30-55 cents per barrel, compared with $1-2 per barrel for African grades and $2-4 per barrel for cargoes sourced from the US or Venezuela.
During the sanctions period, India paid for Iranian oil through a rupee settlement mechanism, allowing Iran to use the proceeds to import Indian goods such as rice and pharmaceuticals through designated banking channels. This helped sustain bilateral trade despite restrictions on dollar-based payments. It is unclear if this mechanism will now be continued or expanded.
“If following a successful peace deal sanctions on Iran are lifted, Iran could be a large supplier to India. There are no policy hurdles as such barring the sanctions by US,” said Prashant Vasisht, Senior Vice President and Co-Group Head, Corporate Ratings, ICRA.
Vasisht noted that before sanctions, Iranian crude contributed more than 10% of India’s overall crude imports and could once again become a significant component of the country’s sourcing mix.
The commercial case for Iranian crude remains compelling. “Iran’s return to India’s crude basket would offer both commercial and operational advantages.
Many Indian refineries, particularly complex refining units, were originally configured to process Iranian crude grades, which deliver high yields of diesel, petrol and jet fuel with minimal operational adjustments,” he said.
The return of Iranian barrels could reshape an import basket that has undergone a dramatic transformation since 2019. According to Sehul Bhatt, Director, Crisil Intelligence, Iranian volumes were initially replaced by Iraq, Saudi Arabia and the UAE after sanctions took effect.
Subsequently, the Russia-Ukraine conflict triggered a major realignment in global crude trade. Russia’s share in India’s crude imports surged from negligible levels before FY22 to around 21% in FY23 and nearly one-third of total imports between FY24 and FY26, making it India’s largest supplier.
“If sanctions are eased, Iran could re-emerge as an additional sourcing option for Indian refiners. The strategic significance lies in expanding India’s sourcing flexibility and reducing concentration risk in the crude import basket,” Bhatt said.
According to Yogesh Jambhale, Senior Manager-Research at Rubix Data Sciences, Iran accounted for 11% of India’s crude supplies in FY19 and could regain a high-single-digit market share if sanctions are durably eased and supplies remain commercially competitive.
Jambhale noted that during the 107-day Hormuz disruption, Russia’s share of India’s crude imports rose to 38% in April 2026, with imports valued at $5.8 billion, as refiners hedged against supply risks from West Asia.
He added that Iranian crude could re-enter India’s import basket within weeks of sanctions relief, given that Indian refiners including IOCL, MRPL, Reliance and Nayara have historically processed Iranian grades and possess compatible refinery configurations.
“The key challenge is translating any geopolitical understanding into a formal and sustained relaxation of US secondary sanctions, providing legal certainty for banks, insurers, shipping companies and refiners,” Jambhale said.
According to Nikhil Dubey, Senior Refining Analyst at Kpler, Indian refiners remain technically ready to process Iranian crude and imports could resume rapidly if sanctions are revoked.
“There is no doubt regarding the technical compatibility of Iranian grades within the Indian refinery configuration. If sanctions are lifted as part of a formal peace deal, Iranian oil flows to India are likely to resume rapidly,” Dubey said.
While analysts do not expect Iran to offer the deep discounts seen during the sanctions era, they believe additional Iranian barrels entering global markets could improve supply availability and exert downward pressure on international crude benchmarks, indirectly benefiting one of the world’s largest oil importers.