Strait of Hormuz disruption lifts oil prices and inflation pressures, India exposed

Economists are not yet pricing in a full global downturn. Another risk is now dominating forecasts. Higher oil prices are lifting inflation pressure worldwide. That can keep interest rates higher for longer. The trigger is the US-Iran conflict, which is disrupting oil supply and shipping routes.

The Strait of Hormuz sits at the centre of the strain. Before the conflict, about 20.9 million barrels moved daily. That was near one-fifth of global petroleum use. Around 89% of crude and condensate through the strait went to Asia. China, India, Japan and South Korea are therefore more exposed.

Cost pressure spreads beyond fuel markets. Oil is a key input for transport, factories, aviation and chemicals. When crude rises, supply chains often pass costs forward. This can lift prices for goods and services. Diesel matters most for road freight and logistics. Sustained diesel increases can raise food and consumer product delivery costs.

For India, the shock creates a policy trade-off. Authorities must weigh consumer protection against fiscal stress. Oil marketing companies also face pressure when retail prices lag costs. Inflation risks may then feed into monetary policy choices. If price pressures persist, the Reserve Bank of India may face tougher rate decisions.

India is among the most exposed large economies. India imports more than 85% of crude oil needs. The crude oil import bill rose 48.4% year-on-year to $74.8 billion. This was during April-August 2026. Import volumes slipped only 0.4% to 100.7 million metric tons. Higher prices explain most of the increase.

Indicator	Period	Value	Change
India crude import bill	April-August 2026	$74.8 billion	Up 48.4% year-on-year
India crude import volume	April-August 2026	100.7 million metric tons	Down 0.4%
US crude and condensate imports via Hormuz	H1 2025	0.4 million barrels per day	About 7% of US imports

Ratings agencies have still lifted India growth expectations. S&P, Fitch, and Moody's raised FY27 GDP growth forecasts in their latest report. India is expected to stay the fastest-growing economy next year. The key risk is inflation-driven tightening. "But we will cross the bridge when we get there." The festive season is expected to support business activity.

Strait of Hormuz oil prices: shipping disruption and capacity limits

Shipping data shows how sharply flows have slowed. On September 21, only two commodity vessels crossed Hormuz. That compared with 10 vessels the prior day. Before escalation in February, the route handled about 125 large commercial ships daily. Alternative routes cannot fully replace these volumes. Saudi Arabia and the UAE have bypass pipelines, but capacity is much smaller.

This disruption affects more than energy supply. Higher freight costs can widen trade deficits and shift currency markets. Transport delays can also stretch delivery times. That adds strain to already complex supply chains. The crisis is therefore feeding into inflation measures across several regions. The mechanism varies by country, but the pressure starts with energy costs.

Strait of Hormuz oil prices: China, Japan and South Korea exposure

China has heavy reliance on the waterway. More than one-third of China's crude supply usually passes through Hormuz. China also holds strategic petroleum reserves. China has a broad supplier network, which offers a buffer. Even so, higher energy and transport costs can hit factories. That can influence exports, output, and consumer prices across Asia.

Japan remains highly dependent on imported energy. That leaves limited insulation from jumps in oil and gas prices. Higher fuel costs affect households and manufacturers. Airlines and transport firms also face higher bills. South Korea faces similar exposure due to imported energy reliance. Because most Hormuz flows go to Asia, the region bears a large share of the immediate shock.

Strait of Hormuz oil prices: Europe and US pass-through effects

Europe is also feeling higher energy and transport costs. Germany’s industrial base uses large energy volumes. More expensive oil and gas raise costs for factories and logistics firms. The UK faces similar pressure through fuel and household energy costs. For many European firms, shipping disruption adds extra freight cost. Longer delivery times add another supply chain constraint.

The United States has a different import profile. The US is a major oil and gas producer. In the first half of 2025, around 0.4 million barrels per day came from Persian Gulf routes. That was about 7% of US crude and condensate imports. Yet US consumers still track global prices. Regular petrol averaged about $4.47-$4.48 a gallon on September 21.

Across regions, growth and inflation are pulling in opposite directions. A broad downturn is not the dominant view for now. Still, higher oil prices remain a central concern for policymakers. India’s near $75 billion import bill in five months shows direct external pressure. Outcomes depend on conflict duration and whether energy markets stabilise in coming months.