On a Sunday evening in early May, India’s Prime Minister stood at a public event in Hyderabad and said something no Indian leader has quite said before. He asked 1.4 billion people to change how they live — work from home, use public transport, carpool, cancel international holidays, stop buying gold. He compared the moment to the COVID-19 pandemic. Not a natural disaster. Not a domestic emergency. A war being fought in the Persian Gulf, thousands of kilometres away, had gotten so bad that the Prime Minister of India was treating it like a national crisis. And here’s the thing: he was right to.
Most Indians don’t think much about where their petrol comes from, or what happens before the LPG cylinder arrives at the door. That’s understandable — the supply chain is invisible until it breaks. But the numbers, once you look at them, are striking. India imports nearly 85% of its crude oil. About 50% of those crude imports transit the Strait of Hormuz. 60% of its LNG — liquefied natural gas — passes through the same strait. And 90% of its LPG, the gas inside that cylinder used to cook dinner across hundreds of millions of Indian households, comes through Hormuz. When Iran closed that strait in March 2026, India didn’t face a fuel price problem. It faced a supply chain emergency at the most basic level of daily life.
LPG powers the cooking stoves of roughly 330 million Indian households. For many of those families — especially those brought into the formal energy system through the government’s Ujjwala scheme over the past decade — it is the only cooking fuel they have. When Hormuz closed, LPG imports dropped sharply. The government declared it an essential commodity and prioritised household supply over commercial users, which meant restaurants, dhabas, and food stalls found their gas supply cut by 30 to 50%. Many shut down. India’s LPG usage fell 16% in April year-on-year. Black markets for cylinders emerged. Protests erupted. A war involving the United States, Israel, and Iran — countries most Indians have never visited — caused a gas shortage that made it harder to cook dinner. This is what economists call a supply shock. This one was severe.
At the same time, global oil prices were doing something extraordinary. Brent crude went from about $73 a barrel in late February to over $117 by April, peaking at $138 at one point. India spent $174.9 billion on crude and petroleum products in the last financial year alone — 22% of its total import bill. Now imagine that number jumping significantly in a single year with no ability to cut back, because the economy literally cannot run without energy. The consequences cascade. Petrol and diesel prices, held artificially stable for nearly four years, were under so much pressure that the government was deliberating a ₹4–5 per litre hike. Inflation, sitting at a comfortable 3.21% in February, was projected to climb to 4.5% and above. And India’s foreign exchange reserves — the dollar savings held to pay for imports — fell from $728 billion before the war to $690 billion by May, a $38 billion drop in roughly two months.
This is precisely why Modi asked people to stop buying gold. Indians imported $72 billion worth of gold last year, second in the world only to China. Gold is bought in rupees, but India pays for it in dollars. Every Indian buying gold or travelling internationally drains the same pool of foreign exchange that India needs to pay for oil. In a crisis, jewellery and holidays are luxuries the country’s reserves cannot afford.
The situation has also exposed something diplomatically uncomfortable. India has long maintained a careful balancing act — friendly with the US, buying Russian oil, maintaining ties with Iran, partnering with Gulf states. In a stable world, that strategy is brilliant. In a world where the US is bombing Iran and Iran is seizing Indian ships in the Gulf, it becomes nearly impossible. India didn’t condemn the assassination of Iran’s Supreme Leader. Iran fired on Indian vessels and seized one in April. And then came the real sting: Pakistan — India’s historic rival — emerged as a key mediator in ceasefire talks between the US and Iran, alongside Egypt and Turkey. India, with all its aspirations to regional leadership, was watching from the sidelines as Islamabad took a seat at the table.
Strip away the geopolitics and what remains is a structural truth India has always known but never urgently confronted: it is deeply exposed to shocks it cannot control. 85% of oil imported. 90% of LPG through one strait. No significant strategic reserves as a buffer. The global brokerage UBS cut India’s growth forecast for FY2027 from 6.7% to 6.2%, calling it a “historically large energy shock.” Someone else’s war is making your daily life more expensive — and that invisible thread connecting a military strike in Tehran to a gas cylinder in Chennai is exactly why economics is worth paying attention to.
