Hormuz closure disrupts 18.4 million barrels per day oil: Report

Mumbai: The closure of the Strait of Hormuz has disrupted the movement of 18.4 million barrels of oil per day—making it the biggest oil supply shock ever recorded, even larger than the 1973 Arab oil embargo. It has also affected 20 per cent of the world’s LNG trade and one-third of globally traded fertilisers.

The impact is felt most strongly by emerging and oil-import-dependent countries. Nearly 84 per cent of the crude oil and over 80 per cent of the LNG passing through Hormuz is meant for Asian markets.

The Energy Transitions Commission (ETC) has come out with a new report, Lessons on Energy Security after the Hormuz Crisis: How Accelerating the Clean Energy Transition Builds Resilience Against Future Price Shocks.

ETC estimates the crisis could add $1–2 trillion in additional gross fuel expenditure to the global economy in 2026 alone if current prices are sustained: not for more energy, but for the same energy at a higher cost.

As per the report, the crisis does not justify new coal capacity or delays to coal phase-out timelines. Any new coal capacity would take years to come online, while renewables and storage can be deployed more quickly and are the lowest-cost option.

Dependence on Hormuz is highly concentrated in Asia. Around 84 per cent of crude oil and over 80 per cent of LNG transiting the Strait of Hormuz is destined for Asian markets, reinforcing the region’s disproportionate vulnerability to disruption.31 Sri Lanka, Pakistan, Bangladesh, India and the Philippines are all experiencing physical product shortages.

In South and South-East Asia, where large shares of households rely on LPG for cooking and diesel for transport and agriculture, price increases quickly erode purchasing power and disrupt access to essential services.

In Pakistan, Sri Lanka and parts of India, previous energy price spikes have led to fuel shortages, rolling power outages and increased fiscal pressure from attempts to stabilise prices, and similar dynamics are already emerging.

"The current crisis shows that fossil fuel dependence is not only a climate risk but also an economic and strategic vulnerability. Clean energy systems are more distributed, more efficient and less exposed to the price shocks created by continuous dependence on traded fuels,” Adair Turner, Co-Chair, ETC.

Though the pace and mix of deployment will vary by national circumstances, a coordinated response across renewables, electrification, green fuels, fertilisers and efficiency could fully displace oil and gas exports from the Strait of Hormuz by 2035.

"For decades we have built an energy system that is wasteful, insecure, and volatile. Three quarters of the world's population depend on fuels they do not control, priced in markets they do not influence, vulnerable to shocks they cannot prevent. The defining question now is whether governments act to build a more resilient system or to sustain one which is already vulnerable to disruption,” Jules Kortenhorst, Co-Chair, ETC.

Key points for India

India’s strategic oil reserves can meet only around 10 days of demand, making it vulnerable to long disruptions.

India is highly exposed because most oil and LNG passing through the Strait of Hormuz is meant for Asia.

The country faces particular risks in LPG supplies, which millions of households depend on for cooking.

Rising fuel prices and supply disruptions could hurt transport, agriculture and household budgets.

India is speeding up approvals for wind energy and battery storage projects to reduce dependence on imported fuel.

Solar imports into India have surged 141 per cent year-on-year amid the crisis.

LPG concerns are also pushing more consumers toward electric cooking, with induction cooktop sales rising sharply.