Why the US-Iran war will hurt India more than China

On February 28, as the conflict in West Asia escalated with missile strikes, Iran announced the closure of the Strait of Hormuz, a key global shipping trade route. The strait is the only opening from the Persian Gulf to the open sea. This makes it is the easiest channel for the movement of goods from countries situated along the gulf, such as Qatar and the United Arab Emirates, to other parts of the world.

Key among these commodities are natural gas and crude oil. Between 20% and 25% of global crude oil supply passes through the strait, as does 20% of the global supply of liquified natural gas.

As a consequence of the closure, prices have escalated. Crude oil rose sharply from $65 per barrel on February 26, a day before the outbreak of the conflict, to $75.92 by March 3. The price of liquified natural gas rose from $2.8 to $3.06 per million British thermal units in the same period.

Asia is expected to be severely hurt by the crisis – 75% of the oil and 59% of the liquified natural gas through this chokepoint flows to China, India, Japan and South Korea. Of these countries, China and India are likely to be most affected – 38% of crude oil from the strait goes to China, and 15% to India, while 20% of the natural gas goes to China and 25% to India.

In such a situation, the extent of the countries’ dependence on imported oil and liquified natural gas is a key factor in their energy security. Scroll spoke to experts to understand how India and China were positioned in this respect.

“China is definitely in a strong position, while not completely protected from oil price rises,” said Vibhuti Garg, South Asia director at the Institute for Energy Economics and Financial Analysis. “Most of their sectors, like transport and power, rely less on oil and gas. They have electrified and built renewable energy chains and refined critical minerals.”

This is reflected in the fact that in 2024, China’s crude oil imports fell by 2%. In 2025 the International Energy Agency had estimated that the country’s diesel demand could drop by 40,000 barrels a day that year.

A key factor in this reduction is the massive electrification push the country has seen in the last decade, which has relied largely on coal, as well as, to a growing extent, on renewable energy.

India’s reliance on imported oil, meanwhile, has increased slightly in recent years: while 83.8% of its supply was imported in the 2019 financial year, 88.5% was imported in the first ten months of the 2026 financial year.

As a result, in contrast to China, “India’s reliance on oil imports does make us more prone to these risks”, Garg said.

In recent years, China has rapidly electrified various sectors, including transport, construction and manufacturing. From 2015 to 2023, the share of electricity in the country’s overall energy consumption rose by around 1% each year, to reach 32%, much higher than the proportions in the United States and Europe, according to the London-based energy think tank Ember.

The two major sectors that saw massive electrification were manufacturing and transport. Specifically, in the former, heating needed for factories was increasingly provided by electric sources. In the latter sector, China has emerged as the world’s largest exporter and manufacturer of electric vehicles, even as adoption within the country also saw a major spike.

“Electric vehicles and trucks in China have displaced a significant portion of diesel demand,” Elif Binici, an energy analyst at Kpler, told Scroll. Kpler is a data analytics company that tracks several commodities including oil.

But Binici added that this did not mean the country faced no risk of oil shocks at all. Most significantly, she noted, China had a high demand for crude oil that industries need to make refined products, including “light ends”, which refers to fractions like ethane and naphtha, both crucial in the manufacture of plastics and chemicals.

She noted that, in fact, Kpler estimated China’s crude oil use would grow in 2026. “For China, we are expecting a growth of more than 220,000 barrels per day for refined products,” said Binici.

In India, meanwhile, many sectors rely primarily on oil and natural gas as sources of energy. For instance, the transport sector in India has only seen limited electrification – as of the second financial quarter of 2025, sales of electric vehicles comprised around 10% of the total automobile sales. As of 2023, the sector used almost 50% of India’s oil.

This dependence persists despite a major shift in the railways. “Railways in India have more or less reduced their diesel consumption to zero and electrified it. So in that sense, they have been able to insulate train freight from oil shocks,” said Om Prakash, an advisor with the Centre for Financial Accountability. “But the larger transport sector, especially trucks and buses, apart from CNG in a few cities, is still based on oil. There is no insulation there.”

Industries too, remain heavily dependent on oil and liquified natural gas – the sector is responsible for 11.5% of India’s total oil consumption.

“There is tremendous scope for electrification in the Indian economy as a whole in the future,” said Vaibhav Chaturvedi, a senior fellow at the Council for Energy, Environment and Water. He added that “70%-75% of industrial use can be electrified. Right now it is at around 20%”. A key reason for this, he added, is that electricity for industrial use is expensive at present, while fossil fuels are cheaper.

Chaturvedi added that to make this shift, it would be crucial to “produce this electricity using low carbon sources like renewable energy or nuclear energy, or even coal with carbon capture and storage, if that technology becomes technologically and economically feasible”.

Further, like in China, in India, too, other sectors too continue to be dependent on oil – for instance, the residential sector is responsible for 13% of the country’s oil consumption.

China also has a significantly larger buffer stock of oil, experts observed. Since March 2025, Binica said, it had “built a huge inventory of 1.2 billion barrels”. In contrast, India has a stock of around 100 million barrels, Kpler estimated.

One strategy China has used to build this buffer has been to import oil from beyond West Asia. In effect, it has been “building a cushion” in the short term, said Binica.

This is reflected in the fact that while India depends on West Asian countries for more than for more than 50% of its crude oil, China depends on them for around 45% of its supply.

According to China’s General Administration of Customs, as of 2025, China’s highest oil imports, representing 18% of the total oil imports, were from Russia, followed by Saudi Arabia and Malaysia.

One report indicated that China had made a clear shift towards Russian sources. The report, published in an Iranian newspaper in February, noted that China discharged about 115,000 barrels per day less Iranian oil than in January, and that Russian crude oil filled the gap in its requirement. The report suggested that although Iran was offering China discounts of between $10 and $11 per barrel on light crude, China was “prioritising supply stability over marginal price differences, given Iran’s uncertain trajectory amid ongoing nuclear talks and the shadow of potential military escalation”.

Binica noted that China had also been importing oil from Venezuela in recent years. These diversified sources had allowed it to remain “an oil-dependent economy” she said, at relatively low import prices. However, Binica added that if the conflict continues for more than a month, China will face significant pressures.

Meanwhile, Kpler has estimated that India’s stock can last between 40 and 45 days.

To strengthen its position, experts suggest that India should consider importing more crude from other countries. “India will have to think about getting oil from Russia or even Venezuela,” said Garg.

But she noted that in the current situation, countries supplying the oil will have an upper hand in dictating prices. “Supply will come, but India might be getting this supply at increased prices,” due to supply chain challenges, she said. “As a result, it is possible that increased prices of oil imports from other countries might impact inflation, since it will impact oil in terms of transport and other sectors.”

Overall, the “the risk of the current conflict for China will only be in the medium term,” said Binica. “For India, it is a short-term oil price risk.”

Source: Scroll
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