Strait Of Hormuz Disruption And Global Energy Geopolitics

Context

The Strait of Hormuz, a critical global oil transit route, was blocked by Iran following U.S.-Israel military actions on February 28, disrupting energy markets.
This led to a sharp rise in oil prices and instability in global energy supply chains.
Source: Oil, power, and politics of disruption, The Hindu

Energy composition: Oil and natural gas together account for slightly over half of global energy supply.
Functional role: These fuels support transportation, electricity generation, cooking, and industrial raw material needs.
Production centres: West Asian countries such as Saudi Arabia, UAE, and Iran are major producers.
Consumption centres: China, India, and Japan are major consumers with limited domestic reserves.
Strategic chokepoint: A significant share of these energy flows passes through the Strait of Hormuz.

Resource concentration: Large oil and gas reserves are limited to regions like the Persian Gulf and a few countries such as the U.S., Russia, Venezuela, and Canada.
U.S. energy profile: It is both a major producer and consumer, with per capita energy supply far exceeding India and China.
Policy driver: Securing energy resources has been a key objective of U.S. international policy.
Historical shift: Control of oil moved from Western firms to state-owned companies since the 1950s, with OPEC gaining influence in the 1970s.
U.S. response: Increased domestic shale production and strategic interventions in regions such as Iraq, Venezuela, and Iran.

Reserve share: Venezuela and Iran together hold 39% of global proven oil reserves.
Strategic value: Their future production potential influences global energy calculations.
Impact of disruption: Closure of the Strait of Hormuz has altered strategic expectations and disrupted energy planning.

Market shift: Reduced West Asian supply has increased reliance on Russian oil.
Post-2022 context: Despite sanctions after the Russia-Ukraine war, Russia remains a key supplier due to its tradable surplus.
Outcome: Russia has emerged as a beneficiary of current energy disruptions.

Import dependence: India is the second-largest crude oil importer and third-largest consumer globally.
Economic impact: Supply disruptions increase prices of goods and services domestically.
Market influence: India’s oil purchase decisions affect global price stability.

Import pattern change: Share of Russian oil in India’s imports rose from 2.5% (2021) to 39% (2023).
Refining advantage: India processes crude into products like petrol, diesel, LPG, and exports refined products.
Profit dynamics: Discounted Russian crude enabled higher refining margins.
Global effect: This shift helped stabilise oil prices despite sanctions, indirectly supported by Western countries.

Price surge: Oil prices crossed $110 per barrel following the Strait disruption.
Policy shift: The U.S. is encouraging increased purchases of sanctioned Russian oil to stabilise markets.
Emerging trend: Prolonged tensions may reshape the global energy order.

Key Details

Strait width: Approximately 33 km at its narrowest point.
Oil transit: Nearly one-fifth of globally traded oil passes through it.
Energy mix: Oil and gas together constitute over 50% of global energy supply.
U.S. energy supply per capita: Around 10 times that of India and 2.4 times that of China.
Russia’s role: The only major non-West Asian country with a large tradable oil surplus.
India’s Russian oil imports: Increased from 2.5% in 2021 to 39% in 2023.

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