India scrambles for new crude suppliers as Hormuz blockade upends Asian oil markets

India scrambles for new crude suppliers as Hormuz blockade upends Asian oil markets The Strait of Hormuz closure is forcing Asia to rebuild trade flows fast, with India leading the search. India is rapidly diversifying its crude supply sources as the war with Iran blocks the Strait of Hormuz, the chokepoint through which 87% of Asia’s crude and 86% of its LNG transited in 2025, according to pre-conflict trade data.⁴ The Gulf normally supplies 40-80% of seaborne crude imports for China, India, Japan and South Korea.⁴ Now those flows have nearly stopped. That matters because the blockade has already sent ICE Brent crude front-month up around 40% since hostilities began.⁴ At 8:11 AM on May 20, the July contract was trading at $111 per barrel, down 0.25% on the session, while NYMEX WTI front-month fell 0.21% to $103.93.² The war is in its second week, and traders say the market is pricing in prolonged disruption. Thailand wants to buy more oil from Nigeria and Kazakhstan. Vietnam is now sourcing from Angola and Argentina.³ But India has the most to lose. It depends on the Gulf for roughly 60% of its crude imports, and the volume gap is forcing state refiners to scour West African and North Sea grades they rarely touched before. The scramble is reshaping global tanker markets. Large crude carriers in Chinese shipyards represent a fleet expansion equal to around 2% of the existing global VLCC fleet, built using cash built up from strong freight revenues during recent market tightness.⁶ Dry bulk freight is also firming, as longer voyages around the Cape of Good Hope and higher bunker fuel bills push the Baltic Exchange’s dry bulk index to its highest level since December 2023.⁶ But the immediate worry in Asian capitals is not just crude supply. Despite holding an enviable 1.3bn barrels in reserves, enough to cover a year of lost Gulf imports, Chinese authorities have ordered big domestic refiners to suspend exports of diesel and petrol.⁴ That signals Beijing sees the risk as structural, not temporary. The crisis is also accelerating a regional dash for biofuels. Indonesia wants to roll out B50—a 50% palm-oil blend of diesel—by July 1st, a move expected to save the country around $2.8bn in subsidies and slash consumption of diesel by some 4bn litres a year, which the energy minister hopes will mean the end of diesel imports.³ Vietnam has begun selling E10, a blend of ethanol and petrol, ahead of a mandated switch on June 1st.³ Yet the biofuels pivot carries its own risks. “The shift will impose substantial environmental and public health costs,” said Dinita Setyawati, senior energy analyst at Ember.¹ In the short term, emissions are likely to rise as coal use also grows across the region to replace lost gas-fired generation. Environmental experts say the energy crunch could ultimately accelerate Asia’s shift toward renewables, but that is a longer-term bet.¹ Meanwhile, the US federal government has extended the deadline for talks between Lukoil and potential buyers of its foreign business by another month, until June 27.⁵ This is the sixth extension of the deadline, after the Trump administration imposed individual sanctions on Lukoil last October, forcing the company to start looking for a buyer for its international business, which is worth an estimated $22 billion.⁵ The drawn-out process suggests the forced divestment is proving more complex than Washington anticipated. Back in the Gulf, Iran’s foreign minister Seyed Abbas Araghchi said in a tweet: "With lessons learned and knowledge we gained, return to war will feature many more surprises."² Asian buyers are not waiting to find out what those surprises look like. They are already rebuilding their supply chains, one crude cargo at a time. The question now is how long before those new routes become permanent.