Trump's Hormuz Fee Threat Leaves Indian Refiners Exposed as Crude Holds Above $90
A short-lived US proposal to tax Hormuz transit traffic sent Brent above $87, adding fresh pressure to India's $120 billion annual crude import bill.
Donald Trump's proposal on Monday (2026-07-13) to levy a 20% fee on vessels transiting the Strait of Hormuz sent crude prices soaring before he abandoned the idea within days. The whipsaw drove Brent crude up 5% to above $87 a barrel on Tuesday (2026-07-14), before easing to around $85 following the reversal, according to Livemint. ICE Brent front-month was trading at $90.17 a barrel as of Monday (2026-07-27), still well above pre-crisis levels.8
India absorbed the full impact. The country imports roughly 90% of its crude requirements and spends more than $120 billion annually on crude imports, with oil accounting for 17-25% of its total annual import bill, Livemint reported. Every $10-per-barrel increase in crude translates into approximately $42 million in additional daily import costs, by the publication's own figures. At current prices, the arithmetic is punishing.8
The inflation pass-through is already showing up in data. India's wholesale price index rose to 9.87% in June from 9.68% in May, pushed higher by food and energy prices, according to figures released on Tuesday (2026-07-14). The Reserve Bank of India has already cut its growth forecast for the current fiscal year to 6.6% from 6.9%, citing the West Asia conflict, elevated energy prices, and supply disruptions as the primary risks.8
Yet India has moved quickly to insulate itself. Crude oil stocks held in strategic, commercial, and refinery storage reached 104 million barrels at end-June, up from 90.5 million barrels at end-April, according to Kpler data cited by OilPrice.com on July 3 (2026-07-03). That is still below the 107 million barrels held at end-February before the Iran war began, which was the highest end-month level in the prior twelve months. The buffer is substantial. It is not complete.7
The stockbuild reflects record crude import volumes in June, a period when the Hormuz situation created both pricing dislocations and supply uncertainty. S&P Global analysis published on June 23 (2026-06-23) found that the effective closure of the Strait resulted in a 15 million barrels per day cut in Gulf liquids production. Despite that, effective Middle East crude exports rebounded to over 10 million b/d in June through alternative routing via the Red Sea and expanded ship-to-ship transfers east of Hormuz. India's supply chain proved more resilient than feared.6
On LNG, the story was similar. India's LNG imports dropped only 5% despite a 17% global supply disruption, with May volumes declining just 2% year-on-year, S&P found. Diversified sourcing from Oman, the United States, Nigeria, and Angola kept flows near normal levels.6
Russian crude has been a complicating variable. Sanctions dynamics stemming from the Iran war had already pushed Russia's share of Indian crude imports below 20% in January 2026, Atlantic Council analysis from June 5 (2026-06-05) noted. The US Treasury issued short-term sanctions waivers to stabilise global energy markets during that period, a diplomatic tool that directly shaped India's import mix.3
The US angle matters for more than just waivers. American crude production now exceeds 13 million barrels per day, with total liquids output above 20 million b/d, according to remarks at the Atlantic Council's Global Energy Forum on June 10 (2026-06-10). That export capacity gives Washington direct leverage over India's supply diversification, and any deepening of US-India energy trade would reduce New Delhi's exposure to Hormuz-linked disruptions.5
Prime Minister Narendra Modi signalled as much in May (2026-05-22), urging his government to explore alternative energy sources including biogas as a substitute for LPG, according to OilPrice.com. The directive came as the Middle East crisis was sharpening supply anxieties in New Delhi. Nuclear power has also resurfaced as a longer-term consideration, with commentary in the Economic Times on June 8 (2026-06-08) pointing to Hormuz as an argument for India to accelerate nuclear capacity on reliability and energy security grounds.1,4
The IEA framed the broader picture in stark terms in early March (2026-03-02), describing the world as facing its biggest-ever energy security crisis as Iranian war disruptions forced nations toward new supply routes and domestic production growth. For India, the Hormuz situation has made that abstract warning concrete.2
The unresolved variable is Trump himself. The transit-fee proposal was dropped, but the episode demonstrated that unilateral US policy moves can reprice crude by 5% in a single session and leave Indian refiners scrambling regardless of how well-stocked their tanks are. India's inventory position has improved sharply since April. Its ability to hedge against Washington's next move in the Strait is a different question.8,7