Not So Strait-Forward: Hormuz, Iran, and the Future of Gulf Oil and Gas Flows

Council on Foreign Relations  |  Clara Gillispie

An interim U.S.-Iran peace agreement has initiated the reopening of the Strait of Hormuz, attempting to restore a seaborne energy corridor disrupted by a 100-day shut-in of ten million barrels of daily oil supply and 300 million cubic meters of liquefied natural gas. This critical development aims to stabilize volatile global energy markets, though full recovery remains highly uncertain.

Unwinding a market disruption of this scale requires navigating severe physical and operational bottlenecks, beginning with clearing hundreds of vessels that remained stuck inside the Gulf. Furthermore, approximately eighty mines still litter key shipping lanes, prompting Iran and Oman to advance a controversial plan to collect payments for safe passage. While QatarEnergy aims to restore 80 percent of its export capacity within two months, extensive infrastructure damage across the region will suppress long-term output. Consequently, while buyers in China are rapidly absorbing returning volumes, importers in India continue hedging their bets, accelerating efforts to bypass the volatile waterway entirely.

Comment

For New Delhi, the fragile reopening of the Strait of Hormuz underscores the persistent vulnerability of India's energy security architecture to West Asian geopolitical shocks. While the temptation to return to cheaper Gulf crude remains strong, Indian planners must treat this interim peace with extreme caution and continue prioritising supply diversification, particularly through long-term arrangements with non-Middle Eastern producers. Furthermore, the proposed transit fees by Iran and Oman highlight how regional littoral states are increasingly weaponising key choke points, necessitating a more robust Indian naval presence and diplomatic engagement in the western Indian Ocean to safeguard vital sea lines of communication.

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