Red Sea Conflict Expands India’s Crude Oil Supply Risks

India faces fresh crude-oil supply risks as the Houthi militia threatens Saudi-linked tankers passing through the Bab-el-Mandeb Strait. While Russian crude and diversified sourcing may provide temporary relief, disruptions in the Red Sea or Russian export infrastructure could raise freight costs, delivery times and global oil prices.

Expansion of the Conflict

• The oil-supply threat, earlier concentrated around the Strait of Hormuz, has now expanded to the Red Sea.
• Houthi forces have targeted Saudi-linked vessels attempting to cross the Bab-el-Mandeb Strait.
• Vessel crossings reportedly declined from around 43 per day in early July to 31 per day in the later period.

Significance of Bab-el-Mandeb

• Bab-el-Mandeb connects the Red Sea with the Gulf of Aden and the Arabian Sea.
• It is a crucial route for Saudi oil shipments to Asian markets, including India.
• A blockade could force tankers to take longer routes, adding nearly four weeks to delivery time and increasing freight costs.

India’s Vulnerability

• India imports more than 88% of its crude-oil requirements.
• Disruptions to Saudi shipments could affect refinery supplies and increase domestic exposure to global price volatility.
• However, the immediate supply risk remains manageable due to alternative suppliers and existing commercial inventories.

Russian Crude as a Major Buffer

• Russian crude currently serves as India’s principal fallback option.
• India’s Russian oil imports rose from around 1 million barrels per day in February to nearly 2.6 million barrels per day in June.
• Russian oil accounted for over 50% of India’s total crude imports in June.
• Imports could potentially exceed 3 million barrels per day, depending on availability and market conditions.

Limitations of the Russian Option

• Additional Russian barrels are limited because China and Türkiye also compete for the same supplies.
• Discounts on Russian Urals crude have declined, with some barrels being offered at a premium.
• Russian exports may fall as damaged domestic refineries resume operations and consume more crude internally.

Risk to Russian Export Infrastructure

• Continued Ukrainian attacks on Russian oil infrastructure pose a major risk to India’s supply security.
• The Novorossiysk Black Sea complex supplied about 28% of India’s crude imports in June.
• Unlike Red Sea shipments, oil exported from Black Sea terminals has limited alternative routes.
• A prolonged disruption could significantly tighten global crude availability and indirectly affect India.

Emergency Alternatives

• Indian refiners may increase purchases from American and South American suppliers.
• Saudi Arabia’s East-West or Yanbu pipeline, carrying about 300,000–500,000 barrels per day, can provide a temporary supply buffer.
• Refiners may also draw upon commercial inventories to manage short-term shortages.
• However, longer voyages from alternative markets would raise transportation costs and delivery time.

India’s diversified crude basket and access to Russian oil provide short-term protection against Red Sea disruptions. Nevertheless, simultaneous disruption of Saudi shipments and Russian export infrastructure could significantly increase India’s oil-import costs, inflationary pressures and energy-security risks.