The International Energy Agency (IEA) has forecast a decline in global oil demand for the year, attributing the drop primarily to 'deep cuts' in the Asia Pacific region as ongoing disruptions in the Strait of Hormuz continue to destabilize the global oil market [1]. The IEA highlighted that the Iran War has severely impacted Asian supply chains, with governments across the region implementing power-saving measures, export restrictions, and subsidies to mitigate the energy crisis [1]. The agency warned that these interventions, while necessary in the short term, could further disrupt market balances and increase volatility in global energy prices [1].
The situation is particularly acute for India, which is grappling with a dual shock: the U.S. blockade of the Strait of Hormuz, initiated on April 14 to cut Iranian oil supply, and the expiration of a U.S. waiver allowing Russian crude purchases on April 11 [2]. India, the world's third-largest oil importer, relies on imports for more than 85% of its crude oil needs—about 5.5 million barrels per day [2]. In March, India imported 1.5 million barrels per day of Russian crude under the U.S. waiver, but with its expiration and the loss of Iranian barrels, the country faces a mounting supply squeeze [2]. According to Mukesh Sahdev, chief oil analyst at XAnalysts, India has already lost about 3 million barrels per day of crude that previously transited through the Strait of Hormuz, forcing refiners to seek alternative supplies, particularly from Russia [2].
India's strategic reserves are limited, with roughly 160 million barrels—about 30 days of supply—compared to China's 300 days' worth of reserves, leaving India in a vulnerable position if disruptions persist [2]. The impact of the Middle East conflict is already evident in India's macroeconomic indicators: HSBC's flash Purchasing Managers' Index showed private sector activity in March slowed to its lowest level since October 2022, with companies citing the Middle East conflict, unstable market conditions, and rising inflation as key concerns [2]. India's finance ministry has also warned that its growth forecast of 7.0%–7.4% for the financial year ending March 2027 faces 'considerable downside' risk due to rising energy costs and supply chain disruptions [2].
Both sources emphasize the uncertainty and concern gripping policymakers and markets, with the IEA noting that traders are adjusting positions in response to changing supply dynamics [1]. While no specific price levels are provided, the overall sentiment is one of heightened volatility and risk for global and regional energy markets [1][2].
CONCLUSION
The ongoing disruption in the Strait of Hormuz and the expiration of key waivers are causing a significant contraction in global oil demand, with Asia—and India in particular—bearing the brunt of the crisis. Policymakers and markets are bracing for further volatility, as energy supply shocks threaten economic growth and stability across the region.