Hormuz Lockdown: How The Middle East War Far From Its Shores Is Reshaping India's Cost Of Living

The escalating conflict in West Asia—involving the US, Israel and Iran—has moved from geopolitical headlines to the household budgets of millions of Indians. As of late March, the partial closure of the Strait of Hormuz has disrupted the transit of nearly 20 per cent of global oil and 30 per cent of seaborne liquefied natural gas (LNG). For India, which relies on this region for over 80 per cent of its crude and nearly half of its natural gas, the war has triggered a "double whammy" of supply scarcity and a weakening rupee, which recently hit a record low of Rs 93.94/USD.

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Energy and fuel: First line of inflation

As global Brent crude prices surged past $110 per barrel in mid-March, it has now tumbled down to $100.75 per barrel owing to peace hopes as floated by US President Donald Trump although Iran is firmly denying it. Even as Indian oil marketing companies are reassuring of sufficient stock in petrol and diesel, they recently passed the extra costs onto consumers by hiking price of premium petrol variants by up to Rs2.35 per litre.

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While regular petrol has seen some government protection, the industrial sector is facing a much harsher reality. Bulk diesel prices for commercial use have jumped by nearly Rs22 per litre, directly inflating the cost of running factories and transport fleets.

In the kitchen, domestic LPG cylinders saw a price hike of Rs60 in early March, reaching Rs913. Commercial cylinders, essential for the restaurant industry, spiked by over Rs115. There is also shortage of commercial cylinders leading to trimmed menus, costlier food items and in some cases shutdown of eateries.

LPG crunch has hit the country in many states with consumers complainig about unavailability of cylinders

This energy crunch is compounded by the fact that natural gas supplies to industrial users have been capped at roughly 70–80 per cent of their requirement due to the halt of shipments from Qatar, forcing many units to switch to more expensive alternative fuels.

Household staples and grocery emergency

The disruption of Gulf shipping routes has triggered a spike in grocery bills. Beyond the rising cost of transporting vegetables via diesel trucks, specific imports are seeing massive price hikes. India relies on Iran for 23 per cent of its apple imports and a dominant share of dry fruits, including 60 per cent of its pistachios and 39 per cent of its almonds. With the Strait of Hormuz blocked, these items are being airlifted or rerouted around Africa, leading to retail price jumps of 40 to 120 per cent in some urban markets.

Cooking oils are also under pressure. Sunflower and mustard oil prices have increased by Rs10–Rs15 per litre as freight surcharges and war risk insurance premiums for Red Sea transit have skyrocketed. Small exporters are reporting shipping surcharges as high as $3,000 per container, a 300 per cent increase from pre-war levels.

Agriculture: Rising costs for the next harvest

The ongoing war in the Middle East is casting a long shadow over future food security. Disruptions to fertiliser and energy supply lines in the region have halted the trade routes essential to global agriculture, creating a food crisis risk even deeper than that of 2022 at the start of the Russia-Ukraine war.

The near-complete halt of shipping traffic in the Strait of Hormuz—the world’s most critical transport route for strategic raw materials like urea and ammonia—has directly threatened farmers worldwide. This vital energy and oil waterway has seen disruptions affecting 38 per cent of the global nitrate-based fertiliser supply and 20 per cent of phosphate-based fertilisers.

India currently has enough fertiliser stocks, but officials warn that a prolonged West Asia conflict could disrupt raw material imports and affect supply in the future

The closure of the Strait of Hormuz has led to a 33 per cent contraction in the global fertiliser supply chain. The region's annual urea exports of 22 million tonnes have come to a halt. Because 46 per cent of the global urea supply is sourced directly from the Gulf region, this cessation of exports has significantly stoked the crisis. Furthermore, logistical disruptions have left roughly half of the 2.1 million tonnes of urea stockpiled over the past two years stranded, as they could not be loaded onto vessels.

The Strait of Hormuz serves as a lifeline for global markets, with Saudi Arabia, Qatar, UAE, Bahrain and Iran acting as the largest suppliers in the global nitrogen fertiliser market. As a result of the war, costs for urea and ammonia have seen dramatic spikes. In just three weeks of March, ammonia prices climbed by 24 per cent to reach Rs600 per tonne, while global urea prices jumped by nearly 50 per cent.

For India, the impact is severe because roughly 65 per cent of the country's ammonia imports are sourced from the Arab Gulf. Consequently, the "force majeure" declared by several Middle Eastern suppliers has forced Indian plants to operate at reduced capacity.

A meeting of the Group of Ministers regarding the evolving West Asia situation was held at Parliament House on Tuesday. The session focussed on the potential impact on essential supplies, specifically fertilisers. According to ANI, the ministers reviewed current availability and concluded that there is no immediate shortage for the upcoming Kharif season, providing assurance that farmers' requirements will be met.

However, the ongoing regional crisis is still expected to impact fertiliser production by an estimated 0.6 to 0.9 million tonnes. To manage this, the Indian government has scrambled to secure 13.5 lakh tonnes of urea via global tenders to build a buffer. Despite these efforts, the increased procurement costs are expected to balloon the government's subsidy bill and eventually increase the overall cost of food production for the upcoming Kharif season

Safe-haven paradox: Gold and silver

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Typically, war drives investors toward gold, but March 2026 has presented a volatile trend. While gold hit a record high of Rs1,63,060 per 10 grams earlier in the month, it witnessed a sharp 10–15 per cent correction by March 24, dropping toward Rs1,42,910. This was driven by a stronger US dollar and expectations that central banks will keep interest rates high to fight the very inflation caused by the war. However, silver has shown more resilience, gaining modestly to reach Rs2,35,000 per kg due to its dual role as a safe haven and an essential industrial metal for the electronics and solar sectors.

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