Global oil crisis, Iran war and the need for India’s long-term economic security

The ongoing Iran war and rising tensions in the Strait of Hormuz have begun impacting the global economy in a serious manner. Oil prices, shipping costs, insurance premiums, currency markets, and global supply chains are all witnessing increasing volatility. The International Energy Agency (IEA) has described the situation as one of the most serious potential disruptions to the global energy market in recent history.

For a large energy-importing nation like India, this is not merely a foreign policy issue but a matter of national economic security, energy security, and strategic stability. Today, India imports nearly 85-89 per cent of its crude oil requirements. In FY25, India imported approximately 242-243 million tonnes of crude oil. Nearly 50 per cent of India’s crude imports come from the Gulf region, while around 60 per cent of LNG imports are also dependent on this region. Almost 90 per cent of India’s LPG imports pass through the Strait of Hormuz route.

In the last financial year, India’s crude oil and petroleum import bill reached nearly 174 billion dollars, accounting for more than 20 per cent of the country’s total imports. Due to the ongoing conflict and geopolitical uncertainty, Brent crude prices have surged sharply, the Indian rupee has weakened to a record 95.31 against the US dollar, and according to Reuters, India’s Balance of Payments deficit in FY26 may rise to 66-70 billion dollars compared to approximately 26-28 billion dollars last year.

India is also among the world’s largest consumers of gold. In FY26, India imported nearly 72 billion dollars' worth of gold, accounting for around 10 per cent of the country’s total import bill. Gold imports place enormous pressure on foreign exchange reserves, increase dollar demand, and widen the trade deficit.

India’s dependence on the Gulf region is not limited to energy alone. Nearly 40 per cent of India’s urea and phosphate fertiliser imports come from the Gulf region. India also receives more than 125 billion dollars annually in remittances from Gulf countries, while millions of Indian workers and professionals are employed across the Middle East.

The war has significantly increased shipping insurance costs, raised global freight rates, and disrupted supply chains. Recognising the seriousness of the situation, India has initiated “Operation Urja Suraksha,” under which the Indian Navy has intensified protection of energy cargo routes in the Arabian Sea and Strait of Hormuz region.

This crisis is not merely a temporary economic shock but a strategic warning that India must now move rapidly toward building a long-term national economic security framework.

To prevent such vulnerabilities in the future, India must take three major national policy decisions.

First, India must launch a large-scale “National Energy Independence Mission” aimed at gradually reducing imported fossil fuel dependency over the next 15-20 years. This would require mission-mode expansion of solar power, nuclear energy capacity, green hydrogen, electric mobility, rail-based freight transport modernization, ethanol, biofuels, and compressed biogas ecosystems. If India can reduce its oil dependency from 85-90 per cent to even 40-50 per cent, it would represent one of the country’s greatest strategic economic achievements.

Second, India must establish a “National Strategic Reserves & Resource Security Framework.” India must treat not only oil reserves but also gold reserves, fertiliser reserves, rare earth minerals, semiconductor supply chains, and critical food and energy reserves as strategic national assets. The country should urgently work toward creating 6-12 months of strategic fuel reserves, expanding the Indian shipping fleet, strengthening maritime security systems, and acquiring global mining and energy assets.

Third, India must transition from a consumption-driven economy toward a productive and efficient economy. This would require a national push for public transport expansion, Work From Home ecosystems, AI-based energy efficiency systems, domestic tourism promotion, gold import reduction strategies, and energy-efficient industries and buildings. India spends lakhs of crores every year on imported oil, gold, and external energy systems. If these resources are redirected toward innovation, AI, manufacturing, defence production, infrastructure, and research, India can become self-reliant and emerge as a far stronger global power. The world is entering a new geopolitical-economic era where the strongest nations will be those that are energy secure, supply-chain resilient, technologically advanced, and economically disciplined.

It is within this broader national economic security vision that Prime Minister Narendra Modi has appealed to citizens to avoid unnecessary foreign trips, reduce non-essential gold purchases for the next year, increase Work From Home practices, reduce petrol and diesel consumption, make greater use of public transport, metro systems, and EVs, and adopt solar energy and energy efficiency measures to conserve foreign exchange and strengthen India’s energy security.

The writer is an MLA from Sarojini Nagar, Lucknow; Views presented are personal.