ExplainedEnergy
What the Strait of Hormuz attacks mean for what you pay for petrol, diesel and gas
Tankers are being hit almost daily in and around the strait, and Brent crude is back above $106 a barrel. Why a narrow channel off Iran matters so much to India, why pump prices have risen far less than crude, and what could change that.
The short answer
India imports about 88% of its crude oil and about half its natural gas, and much of it normally comes through the Strait of Hormuz, which Iran has all but closed since the war began on 28 February. Crude has stayed above $100 a barrel for most of the year. Pump prices have risen in steps since May, with petrol in Delhi going from ₹94.77 to ₹102.12 a litre, because the Centre cut excise duty and state-run oil companies have absorbed part of the cost.
Why does a strait off Iran matter so much to India?
Because India buys most of its oil and much of its gas from abroad, and a large share of it normally sails through the Strait of Hormuz.
The strait is the narrow exit from the Persian Gulf, between Iran and Oman. In normal times about a fifth of the world’s oil and liquefied natural gas passes through it. India imports about 88% of the crude oil it uses and about half of its natural gas, and the bulk of those cargoes have come from Gulf producers through this one channel.
Since the war began with US and Israeli strikes on Iran on 28 February, Iran has all but shut the strait by attacking ships and laying mines. In the past week alone, Iran’s Revolutionary Guards said they set a supertanker on fire, and two tankers with Indian crews were struck on Sunday, leaving two Indian seafarers missing.
How has that shown up in oil prices?
Crude has stayed above $100 a barrel for most of the year. Brent touched $126 on 30 April, its highest since June 2022. It settled at $106.65 on Monday, 12 October, after the latest attacks on Gulf shipping and on Riyadh’s airport.
The rupee has made it worse. India pays for oil in dollars, and the rupee is close to 97 to the dollar, so each barrel costs more in rupees even when the dollar price holds steady.
Then why hasn’t the pump price doubled?
Because the government and the state-run oil companies have absorbed a large part of the increase.
Petrol and diesel prices were held unchanged for the first weeks of the war. In late March the Centre cut the special excise duty on petrol from ₹13 a litre to ₹3, and on diesel from ₹10 to zero. That did not lower pump prices. It was meant to reduce the losses of Indian Oil, Bharat Petroleum and Hindustan Petroleum, which were then losing ₹48.8 on every litre of petrol and diesel they sold.
Prices began rising on 15 May, when both fuels went up by ₹3 a litre. Further increases followed.
On 11 October petrol cost ₹102.12 a litre in Delhi and diesel ₹95.20. That is an increase of under 8% since mid-May, a much smaller rise than in the price of crude since the war began.
Who pays for the difference?
Partly the oil companies, and partly the government, through lower tax revenue.
Excise collections fell 23% in the months after the March cut, one reason the Centre’s fiscal deficit is running ahead of target. Since Monday, the Reserve Bank has also been selling dollars directly to the three state-run oil companies to cover their daily import needs, so that their buying does not push the rupee down further.
Every one of these cushions has a cost. The longer crude stays high, the harder it is to keep them in place.
What about cooking gas?
LPG prices rose early in the war. The price of a domestic cylinder went up by ₹60 on 7 March, and commercial cylinders by ₹115. India imports much of its LPG, and a long closure of Hormuz keeps that supply under strain as well.
Does it affect people who do not drive?
Yes, through the prices of almost everything else. Diesel moves trucks, tractors and generators, so its cost reaches food, building materials and factory goods. Wholesale fuel and power prices were nearly 23% higher in August than a year earlier, and retail inflation rose to 5.54% in September. The Reserve Bank raised its repo rate on 7 October partly because of oil.
What could push pump prices up further?
Three things: a longer closure, a weaker rupee and the end of the cushions.
If Iran and the United States stay deadlocked over Iran’s conditions for reopening the strait, and attacks on shipping continue, crude is likely to stay high. A further fall in the rupee would add to the bill. And if the government decides it can no longer give up excise revenue, or the oil companies’ losses grow too large, more of the cost will be passed on at the pump.
A reopening of the strait would work the other way, though prices usually fall more slowly than they rise.
The documents
- RBI press release: dollar sales to oil marketing companiesReserve Bank of India, 10 October 2026