This week crude dipped below $80, as a ceasefire reopened the Strait of Hormuz. There is no hurry for New Delhi to return to the Gulf, and every reason to do so.

The Sensex, the rate of the rupee, were not the most significant figures in India's economy for four months. It was the number of tankers that had been crawling in a 33 kilometre wide channel between Oman and Iran. Finally, that number began to increase this week. Washington and Tehran signed an interim deal Tuesday to reopen the Strait of Hormuz and lift the American maritime blockade, and by Thursday, the first cargoes of stranded crude were nosing out of the Gulf, while Brent was below $78 a barrel, its lowest since early March. At least for the moment, the war premium looming over the market since late February is now being priced out.

One would think India, the world's third biggest oil consumer with a daily consumption of some 5.5m barrels, would be next in line. It is not. Unofficially, state-run refiners have informed that they have secured enough crude for the next two months, and are not in a hurry to return to West Asian suppliers despite the chokepoint reopening. India's national energy firm and other Gulf oil producers have begun to press buyers to begin taking deliveries of oil volumes due under long-term deals. New Delhi's processors have not yet made a commitment so far. Indian Oil did offer a tender for hiring a very large crude carrier (VLCC), a Suez max and a gas carrier for cargoes from behind the strait, but according to people close to the development, it was a test to the freight market to gauge the availability of vessels for imports, not a sign of imports resuming. India lowered its consumption of West Asian crude to the lowest level since at least 2013 in the second quarter.

The reluctance is the true story. And it tells you just how much the first four months of this year have scrambled India's thinking on where its oil comes from.

How the artery closed

Go back to the end of February. With the conflict involving the United States, Israel and Iran breaking out, the market found itself losing its most important artery as Tehran's Revolutionary Guard prepared to choke off Hormuz. Usually, nearly one-fifth of the global oil flow about 13 million bpd transits through that channel. The disruption was marked as “the largest of the oil market's history” by the International Energy Agency, which also took the unprecedented measure of releasing 400 million barrels from emergency oil reserves. Had little impact on prices. Brent futures surged as high as $118 in March, and physical cargoes in the North Sea were transacted near $130 and at the panic's height some barrels were trading around $150, which hasn't been seen since 2008. At a brief moment, Russia's Urals, which are typically sold at a discount, were selling at $123. By the eleventh of March, India's own crude basket, which had been keeping within the zone of $62-$70, had jumped to $113.57.

Indicative front-month Brent path (March peak – intraday/physical). Data from market reports, IEA, and Trading Economics. Chart: author.

India returns to Moscow

The numbers for India were stark and simple. Middle Eastern supplies, mostly on term contracts and coming through Hormuz, fell by some 61% to approximately 1.18 million bpd. The area's share of India's import basket slipped to about 26 per cent, which will seem like a stress-test fantasy a year ago. Into that gap stepped Russia. India, which had reduced its Russian imports to approximately 1.04 million bpd in February, as it neared completion of a long-drawn deal with New Delhi and Washington, went all out the opposite way in March, bringing its Russian imports back to around 2 million bpd.

Washington, in a hurry to secure pump prices for India's consumers rather than to police the purity of sanctions, granted a waiver to India to continue purchasing Russian crude which was stuck in the sea, before expanding waiver to others. The irony was obvious and purely practical: the same government that had imposed a 50 per cent tariff on Indian imports the previous August over India's imports of Russian oil were now secretly pleased India was doing so.

As can be seen in figure 2, India has been importing Russian crude oil.

A dip that was leveled in weeks by war

Million bpd, period averages/snapshots. Source: Kpler trade-tracking data reported. Chart: author.

The funds that fuel the addiction.

All this didn't just happen out of nowhere. India's love affair with Russian crude is only four years old and it used to make up less than one per cent of India's crude imports even prior to the Ukraine invasion in 2022. It had reached about 36 per cent of the barrels India purchased by the 2023-24 and 2024-25 fiscal years, when it was at its highest point in India's history, month after month. It was a matter of money. When India offered the most generous deals, they were for delivered Russian crude, at discounts of up to eight to ten dollars a barrel to Brent, and India didn't just burn the stuff, it also refined it and re-exported diesel and jet fuel to Europe and elsewhere, making one of the most profitable transactions in its energy history a geopolitical workaround. The nation imported nearly $52.7 billion worth of Russian crude in 2024.

That trade also brought sanctions on Rosneft and Lukoil, as well as a constant swirl of Western annoyance, which is why by the end of 2025 Indian refiners were already quietly moving the Russian share back below 25 per cent to ease the trade negotiations with Washington. The deal was inked in February. The script was torn up within weeks of war.

The import mix of crude oil in India is shown in figure 3.

Now three of four barrels go around Hormuz.

About 26% for Gulf (Iraq + Saudi + UAE) for war time mix. Now India imports from as many as 40 countries. Data source(s): trade data, ministry briefings (as reported). Chart: author.

A shock is experienced on the macro level.

The price fluctuation was as significant as the source fluctuation to the Indian economy. Every dollar per barrel equates to an additional $1.5-$2 billion to an annual crude import bill that is already well north of $130 billion, and the shift from $113 in March back below $80 this week means the difference between an inflation scare and breathing room. At the time of the first closure, analysts cautioned that a persistently high spike would result in a broad-based current-account deficit, drive down the rupee, increase fuel and food costs and illuminate the fiscal arithmetic as the Reserve Bank of India (RBI) attempts to keep rates unchanged, while wealth managers openly voiced their concern that foreign investors would sour on richly valued mid-cap stocks. Much of that has been taken out of the system by the drop in prices. It has also brought a harsh reminder to North Block that how vulnerable a fast growing and import dependent economy is to a war 2,000-kms away.

The world is reorganized around it

Realignment was not just in India's coastline. Refinery runs plunged 9.1 per cent year on year to 12.7 million barrels a day as margins went negative in China, the only buyer bigger than India, leaving New Delhi and Beijing battling it out for the same discounted Russian cargoes. The Moscow embassy to Delhi said on Indian TV that sales had been increasing by leaps and bounds and that the Russians wished to retain them, defying the U.S. pressure as illegitimate. Meanwhile, Abu Dhabi has been happy to offload at least 30 million barrels of spot crude to Asian buyers this month as Gulf output resumes. Goldman Sachs now forecast that Brent will average about $80. Plus OPEC+, the group that raised quotas through the war to make up for the shortfall, is now tasked with navigating the market from famine to glut.

Delhi is not in a hurry to get back

But why has India not started to rush back to the less expensive and closer crude from the Gulf countries now that the lane is clear? All those who are living off the modeling of these flows have determined that the question is misphased. On their read, Russian crude was never a war time improvisation that India will now put aside. It's been the heart of the nation's import strategy for three years and will likely continue to serve that purpose, with or without waivers. Last year's pullout wasn't one of principle, it was a dial down due to sanctions hassles and tariffs and payment issues, and it reversed as soon as the Gulf turned unreliable.

As India has discovered the hard way, energy security comes at a cost, and it's one that is paid in options, not allegiance.

That's what refiners learned. A ceasefire agreement signed on Tuesday can be rescinded. The strait was re-opened once earlier this year in April, but was again closed within days, and Israeli activity near Lebanon has not been helping to preserve the current truce. Given the higher freight rates, War Risk insurance which remains higher than their pre-crisis levels and the uncertainty of the peace, expanding the sourcing book isn't a sign of weakness it's a strategy. The reason why Russian crude may not be as of a bargain as it's been in recent months it is now quoted less than a dollar or two cheaper than dated Brent is that it doesn't need to go through the world's most hazardous chokepoint.

The lesson that will outlast the war

No single supplier can be called the structural takeaway. Prior to the war, about half of Indian crude transited through Hormuz; the war jolted everyone to realize this was the quietest and largest energy vulnerability for India. New Delhi's response has been to diversify its suppliers - from as many as 40 countries, purchasing crude from Venezuela, which reached multi-year highs, with some 70 per cent arriving outside the strait by March. Now there is a 24 hour control room monitoring stock levels. There are only around 74 days of normal consumption covered by strategic reserves, which is less than China's and would see a rapid depletion in a real siege.

Thus, not indecision is India's behavior this week. It's a nation that has determined that diversification is a way of life, and no supplier, no matter how friendly or how pressuring, will take it for granted as a captive customer. The Gulf will receive its volumes back at some point, as dictated by contracts and refinery setups. However, the time when West Asia could count on India has passed as has the time when anyone, Washington included, could count on India to stop accepting Russian crude at a moment's notice. The strait is open. That's New Delhi's pace and not one barrel out of pace!