Hormuz risks, China buying to lift freight, insurance; India’s import bill seen rising

China, which accounts for nearly 90% of Iranian crude purchases, is likely to turn to alternative suppliers if access to Iranian cargoes is constrained. This, analysts said, could intensify competition for key crude grades and reshape shipping routes across the region.

“India’s vulnerability is not just about how many Iranian barrels it can or cannot buy. It is about the broader tightening of ‘deliverable supply’ into Asia,” said Priya Walia, Vice President, Commodity Markets – Oil at Rystad Energy.

India’s import dependence on Middle East

India sources about 55–60% of its crude from the Middle East, leaving it exposed to disruptions in Gulf logistics and cargo availability. The current situation, analysts said, is no longer just about supply volumes but about whether those barrels can physically reach markets.

“The Strait of Hormuz shock has already turned supply from a policy variable into a logistics variable: the question is no longer only who has crude, but which barrels can still move, at what freight, insurance and political premium,” Walia said.\

Bigger impact expected to come from China’s re-entry

While India has only recently resumed limited purchases of Iranian crude, the bigger impact is expected to come from China’s re-entry into the global crude pool. “If US pressure reduces the availability of Iranian barrels and China is forced to replace part of its Iranian intake elsewhere, that would tighten competition for alternative medium- and heavy-sour crude across the market,” she said.

That shift is likely to push up costs for India, which relies on similar grades for its refining system. “For India, that means higher replacement costs, more competition for compatible barrels from Russia, West Africa and America, and additional inflationary pressure on crude prices,” Walia added.

The disruption is also spilling over into shipping markets. Even cargoes not directly linked to Iran are facing higher costs and delays as risk perception rises.

“In markets like this, the disruption tends to spread through shipping behavior even before formal restrictions widen… the formal scope may be narrow, but the commercial impact can be much broader,” she said.

Freight rates, insurance premiums and tanker availability are already being affected, raising delivered costs for importers. The same dynamics apply to LNG shipments moving through the Strait of Hormuz.

India’s exposure is heightened by limited rerouting options for key Gulf producers. While Saudi Arabia can divert some volumes through alternative pipelines, countries such as Iraq and Kuwait remain heavily dependent on Hormuz-linked routes.

“India is materially exposed… not only to outright disruption, but also to reduced availability of the medium and heavy sour grades that best fit many Asian refining systems,” Walia said.

Even without supply cuts, the cost impact is expected to build. “The market is repricing not just crude scarcity, but deliverability… the delivered cost will still rise through insurance, war-risk premiums, tanker availability and longer voyage times,” she said.

A separate assessment by S&P Global Energy said the current ceasefire has reduced immediate risks but uncertainty remains.

“Ships going to and from Iranian ports have not openly challenged the US blockade yet, but the risk of miscalculation and retaliation remains high,” said Eric Yep, senior principal analyst.

He added that ambiguity around the blockade’s scope and Iran’s response continues to weigh on shipping through the Strait of Hormuz, a critical route for global energy trade.

Analysts said India’s response will need to be calibrated. “Diversification of sourcing is the most immediate lever… strategic reserves also become more important,” Walia said.

“In short… the real risk is not just losing barrels but paying much more for whatever barrels remain deliverable,” she added.

The evolving situation highlights how shifts in cargo flows and shipping risks driven as much by China’s buying patterns as geopolitics are now shaping energy costs for major importers like India.