India's Refiners Absorb Mounting Losses as Middle East Conflict Reshapes Asia-Pacific Fuel Procurement
India faces a 12-15% annualised earnings drag per disruption month while emergency diesel sourcing from South Korea reveals how deep the regional supply shock runs.
Australia's nationwide gasoline prices reached their highest level since March in the week ending July 20 (2026-07-20), as Middle East hostilities pushed international crude to a two-month peak. The move underlined how persistently the Gulf conflict has priced through to retail fuel costs across the Asia-Pacific.5
The spike followed emergency procurement that governments across the region have been executing since the conflict began. Australia's Federal Government said in April it had secured approximately 100 million liters of additional diesel, with two of the shipments sourced from Brunei and South Korea — a sequence that illustrates how Seoul's refining capacity became a regional backstop precisely when it was under its own supply pressure.5
South Korea sources roughly 70 percent of its crude from the Middle East, meaning Gulf disruptions hit Korean refiners before they can reroute barrels to fill Australian demand. President Lee Jae Myung declared an economic emergency during the week of May 18 (2026-05-18), and Seoul passed an additional $17 billion budget to manage the impact. The USD/KRW stood at 1,465.53 on July 27 (2026-07-27), meaning any renewed crude spike translates directly into higher local-currency procurement costs for Korean refiners.1
India faced a more acute version of the same problem. The country imported 27 million tonnes of LNG in financial year 2025, of which 11.2 million tonnes originated almost entirely from Ras Laffan in Qatar — supply that moves through the Strait of Hormuz. When Hormuz closed, that link broke. New Delhi issued a March 2026 order regulating natural gas supply in response. It withdrew the order on July 4 (2026-07-04) after shipments through Hormuz resumed.3
JKM Asian LNG front-month traded at $21.43 per MMBtu on July 27 (2026-07-27), down 2.6 percent on the session. That softening reflects Hormuz re-opening. But South Asia remains disproportionately reliant on Qatari output, and any renewed disruption would push spot LNG sharply higher before alternative supply can be arranged.3,4
India's crude supply chain cracked at the same time. Russia's share of India's oil imports, which reached roughly 44 percent at its peak, fell to 25 percent by February as Moscow rerouted cargoes. Reliance Industries secured a US licence to receive Venezuelan crude in February, and other Indian refiners followed. Yet according to Economist reporting from May 2026, India had managed to replace less than two-thirds of the lost supply. Reliance has denied buying Iranian oil.2
The earnings math is harsh. Probal Sen of ICICI Securities estimated that for each month the disruption continues, Indian refinery industry earnings will deteriorate at an annualised rate of 12 to 15 percent. ICE Brent crude front-month fell 3.3 percent to $86.06 per barrel on July 27 (2026-07-27), which would ease input costs if it holds — but only for refiners that can actually procure the barrels.2
Governments have absorbed part of the consumer price shock administratively rather than let markets clear. New Delhi acknowledged that aviation fuel costs would have risen by more than 100 percent under unregulated conditions; it capped the pass-through for domestic flights at 25 percent. That gap sits on airline and refiner balance sheets, compounding the margin erosion already accumulating across the supply chain.1
The immediate picture has eased: Hormuz is open, India's gas supply order is gone, and Australia has replenished part of its diesel buffer. Still, South Korea's dual role — Middle East-dependent importer and emergency exporter of refined products — means any renewed Gulf escalation would hit that network from both ends at once. With Korean crude dependence entrenched at 70 percent and Seoul already running emergency budget stimulus, the capacity to absorb another shock without rattling regional refined product markets looks thin.1,5