India’s Plan B for Hormuz crisis

This year showed India what a closed Strait of Hormuz costs. Oil and liquids flowing through the Strait fell from 20.7 mb/d in late 2025 to 14.6 mb/d in the first quarter of 2026. Brent hit a peak monthly average of $117 a barrel in April. With 88% of its crude imported, and more than half of that from the Middle East, India faced acute balance-of-payments stress. Refiners scrambled for Russian, US and Atlantic barrels, but these are a stopgap. Many Indian refineries are built to run on Gulf medium and heavy sour grades.

A new study by EY-Parthenon’s India energy team, advised by a former head of corporate strategy at IOC, sets out a longer-term answer: go around Hormuz entirely. (EY-Parthenon, “How route diversification could strengthen global energy security”, 15 October 2026: https://www.ey.com/en_in/insights/energy-resources/how-route-diversification-could-strengthen-global-energy-security)

The corridor

The proposal is for two 56-inch pipelines carrying 10 mb/d over about 1,800 km, from southern Iraq through Kuwait and down the Gulf coast to Oman’s Arabian Sea terminals at Duqm and Salalah, with storage at Ras Markaz. The estimated cost is about $50 billion. The study says a single 90-day disruption could inflict losses of a similar scale on Gulf producers and Asian importers.

Existing bypasses are not enough. Saudi Arabia’s and the UAE’s pipelines cover only about 45% of normal Hormuz flows. Kuwait, Qatar and Bahrain have none. The Saudi route through Yanbu runs into a second chokepoint at Bab el-Mandeb.

Why India should care

Oman’s ports face the open Arabian Sea, outside both chokepoints. The study estimates sailing times to South and East Asian refiners would be 24–48 hours shorter than loading in the upper Gulf, and India’s west coast is the closest major market.

The economics are the core argument. In peacetime, shipping crude to India’s west coast via Hormuz costs $1.65–1.95/bbl, against $3.3–3.6/bbl through the Oman corridor. In wartime the order reverses: Hormuz rises to $5.65–5.95/bbl, and even with its own wartime costs the Oman route comes out about $1.5/bbl cheaper. The peacetime premium is also smaller than the roughly $1.8/bbl average under-recovery India absorbed between FY23 and FY26. In effect, India would be paying a modest insurance premium against much larger losses.

India also wouldn’t need to build it. The study accepts that Asian buyers are unlikely to fund large infrastructure abroad. It suggests they reserve long-term capacity in Omani storage and loading, and sign dedicated crude supply deals, to get priority access when the Strait closes.

The fine print

The corridor would carry oil, not gas. Qatar sends 93% of its LNG through Hormuz, so India’s gas security still depends on diversifying LNG supply and on the idle capacity at its own terminals. The plan also starts with inter-governmental talks that have not yet begun, and needs agreement among Iraq, Kuwait, the transit states and Oman. Nothing would flow for years.

Still, the case is clear: India has paid for Hormuz risk before. The question is whether it pays for an alternative before the next crisis.