Trump's Hormuz fee flip-flop leaves India refiners exposed as crude spikes
India's 90% import dependence makes it the biggest loser in the Hormuz shipping dispute as Brent swings on Washington's policy reversals.
US President Donald Trump's proposal on Monday (2026-07-13) to levy a 20% fee on vessels transiting the Strait of Hormuz drove Brent crude up 5% to over $87 a barrel on Tuesday (2026-07-14), before prices eased to around $85 following Trump's decision to drop the plan.8 The whipsaw leaves Indian refiners, which had been rebuilding inventories after months of supply disruption, facing renewed uncertainty over their largest source of import cost.8,7
The stakes are outsized for New Delhi. India imports about 90% of its crude oil requirements and spends more than $120 billion annually on crude purchases, with oil typically accounting for 17-25% of the country's total import bill.8 For a nation already wrestling with inflationary pressure, the arithmetic is unforgiving: compared with last year, every $10 per barrel increase in crude prices translates into roughly $42 million per day in additional import costs.8
The wholesale price index inched up towards double-digits to 9.87% in June from 9.68% in May due to higher food and energy prices, data released on Tuesday (2026-07-14) showed.8 The Reserve Bank of India had last month lowered its growth forecast for the current fiscal year to 6.6% from 6.9%, citing rising risks from the West Asia conflict, elevated energy prices, supply disruptions and weather-related uncertainties.8
India's response to the Hormuz crisis so far has been to hoard. Strategic, commercial and refinery crude inventories reached 104 million barrels at the end of June, up from 90.5 million barrels at the end of April, according to commodity intelligence provider Kpler.7 That is approaching the 107 million barrels held at the end of February, just before the Iran war began, which was the highest end-month level in the prior 12 months.7
But stockpiling has its limits. The effective closure of the Strait of Hormuz resulted in a 15 million barrels per day cut in Gulf liquids production, according to S&P analysis.6 Despite that, the energy system adapted through alternative routing via the Red Sea and expanded ship-to-ship transfers east of Hormuz, helping effective Middle East crude exports rebound to over 10 million b/d in June.6
India's diversified sourcing has cushioned the blow. LNG imports dropped only 5% despite a 17% global supply disruption, with May volumes declining just 2% year-on-year as Oman, the US, Nigeria and Angola kept flows near normal levels, S&P data showed.6 That resilience masks a deeper problem: refiners still depend on Gulf crude grades that must transit the strait, and ship-to-ship transfers add cost and time to every cargo.6
The Trump administration's fee proposal and its quick retreat highlight how exposed Indian buyers are to Washington's policy swings. The US Treasury Department issued short-term sanctions waivers to purchasers of Russian crude, which limited India's ability to import Russian barrels; Russian oil's share of Indian crude imports dropped to under 20% in January 2026.3 With that discount supply shrinking, India has fewer fallback options when Gulf routes are threatened.3
Prime Minister Narendra Modi has urged the government to urgently explore alternative energy sources, including biogas as a substitute for liquefied petroleum gas, as the Middle East crisis continues to disrupt fuel flows.1 Nuclear power is also being pushed as a solution, with its reliability, scale and low-carbon attributes offering a hedge against import dependence.4
None of that solves the immediate problem. The International Energy Agency has warned that the world faces an unprecedented energy security crisis, forcing nations to seek new supply routes and boost domestic production.2 The US, which used to import oil, now produces over 13 million b/d of crude and 20 million b/d of total liquids, giving Washington leverage as a supplier of last resort.5
For India, the question is whether the US is a reliable partner or an unpredictable one. Trump's flip-flop on the Hormuz fee, coming within 24 hours, suggests the latter.8 Refiners will watch whether the US Strategic Petroleum Reserve becomes a tool for stabilising Asian buyers, or whether Washington uses its export leverage to pursue its own policy goals.8 The next tariff proposal, or its withdrawal, will be the signal to watch.