New Delhi: Just weeks after India's refiners began exploring the possibility of resuming crude oil imports from Iran, those plans may have run into fresh uncertainty. US President Donald Trump’s declaration on Wednesday that the memorandum of understanding with Tehran is effectively over—coupled with Washington’s decision to end a sanctions waiver on Iranian energy supplies—has clouded the prospects of oil imports, two people familiar with the matter said.
While Indian refiners are currently not shipping in crude from Iran, but they were evaluating the possibility for the medium- to long-term if US sanctions were extended or lifted permanently. Mint had earlier reported that Tehran was expected to sweeten the deal by offering deferred payments and longer credit periods to regain Indian buyers.
The 60-day waiver on sanctions had been issued by the US Treasury Department's Office of Foreign Assets Control on 22 June, permitting production, sale and transport of Iranian crude and petroleum products.
Shares of state-run oil marketing companies—Indian Oil Corp. Ltd, Bharat Petroleum Corp. Ltd and Hindustan Petroleum Corp. Ltd—fell in the range on 3-5%.
The BSE Sensex ended 1,677 points or 2.15% lower at 76,503.60 on Wednesday. Nifty50 on the National Stock Exchange closed at 23,882.05, lower by 516.65 points or 2.12% from its previous close.
“Refiners are still in a wait-and-watch mode and awaiting further clarity. The talks in terms of imports from Iran may be impacted now. India does not procure sanctioned oil at all,” said an official with a refiner on the condition of anonymity. "The plans on that front are more long-run and we hope that this is a short-term issue, and the efforts for peace in the region would continue."
Another official said the renewed hostility would not impact the country's immediate supplies, as it has already secured oil for its requirements till August.
"We have secured the required supplies through August. Similarly, cooking gas supplies are also adequately tied up till next month," said the second official.
Although India has not been procuring oil from Iran, the war-torn country has emerged as a supplier of cooking gas since March. On March 20, the US waived sanctions on Iranian energy sales for a month.
The development also comes at a time when the scenario was turning into a buyers' market, with more and more supplies coming in and suppliers offering discounts and other concessions. Russia is currently offering discounts of around $5 per barrel of crude oil while Saudi Aramco, world's largest oil producing company, recently announced a $11 cut in the price for Asian buyers for August.
The renewed tensions have again put the Strait of Hormuz, which had been choked for most of the US-Iran conflict, at the centre of the global energy markets.
For India, which imports about 90% of its crude oil requirements, any disruption in the Strait of Hormuz poses a significant risk. About 20-25% of India's crude imports currently pass through the waterway, down from 60-70% before the conflict started on 28 February.
Economic hit
Higher oil prices could fuel inflation and weigh on growth at a time when El Niño and a weaker monsoon are already expected to pressure the economy. A rise of $1 per barrel of crude for a year may lead to a rise of ₹18,000 crore in the country's oil import bill, which accounts for 17-25% of the total. In FY26, India's oil import bill was around $123 billion.
The conflict, which started nearly four months ago, involving Iran, the US and Israel has disrupted energy supply chains. The Indian government had only recently started easing the supply restrictions it had put in place for diesel and cooking gas after shipping resumed through the Strait of Hormuz last month.
Maulik Patel, head of research at Equirus Securities, said, “A sustained crude spike widens the oil import bill, pressures current account, feeds inflation and keeps rupee on the backfoot. That said, India's growth has become structurally far less energy-intensive over past two decades.”
Patel said the outlook for oil marketing companies remained mixed but is tilted to the downside. “Marketing margins have recovered recently supporting integrated margins amid strong product cracks also. But a fresh crude spike can quickly squeeze margins if pump prices are held.”
Pronob Sen, former chief statistician of India, said, “The fresh skirmish in West Asia and reinstatement of sanctions on Iranian oil don’t necessarily add a new dynamic to the outlook on inflation and growth of Indian economy. They are not going to change anything radical.”
The Reserve Bank of India last month lowered its growth forecast for the current fiscal year to 6.6% from 6.9%, citing rising risks from the West Asia conflict, elevated energy prices, supply disruptions and weather-related uncertainties. The economy is also seeing inflationary pressures building up with retail inflation at 3.93% in May from 3.48% in the previous month.
Strategic experts said the latest escalation in West Asia could still be a negotiating tactic, rather than a complete diplomatic breakdown.
Shweta Singh, associate professor at the South Asian University, New Delhi, said the ceasefire remained fragile and episodic flare-ups were likely until there was clarity on a broader settlement.
“There is fresh escalation around the Strait of Hormuz, straining the already fragile ceasefire agreement that could be read as a fresh pressure tactic on both sides as the US revokes the 60-day exemption for sale of Iranian oil,” Singh said. “Much remains to be watched as both Iran, and the US would technically settle for an offramp, without the optics of it. But till then Hormuz remains shaky, and so does oil.”
C. Udai Bhaskar, director at the Society for Policy Studies, said oil markets, refiners, insurers and the broader energy ecosystem remain highly sensitive to any increase in violence in the region, and the latest cycle of US-Iran hostilities and renewed sanctions would keep markets on the edge.
"India will also be very concerned if there is a disruption again in the transit of ships through the Hormuz strait, as not only will the import bill go up, but for the common man it will also be reflected in the anxiety of the availability and price of cooking gas cylinders,” he said.
The latest on US-Iran
Speaking in Ankara on Wednesday ahead of the Nato summit, Trump said he had no interest in engaging further with Iran, signalling that the diplomatic opening created by the 18 June memorandum had effectively collapsed. Iranian authorities, however, are yet to give any official statement.
“To me, I think it's over. I don't want to deal with them anymore... I'll speak to our negotiators. They want to negotiate—they're good people... but they have to come back to me. As far as I'm concerned, it's just a waste of time dealing with them,” Trump said in response to a question on the ceasefire.
Crude oil prices hit their highest level since 19 June after the developments. Around 10.45 pm, the September contract of Brent on the Intercontinental Exchange was trading $78.86 per barrel, higher by 6.34% from its previous close. The August contract of West Texas Intermediate was up 5.68% at $74.44 a barrel.
The renewed volatility followed a series of military and diplomatic moves by both sides.
The US Central Command (Centcom) said it struck over 80 targets on Tuesday in response to Iran's alleged attacks on commercial vessels in the Strait of Hormuz, targeting air defence systems, command-and-control networks, coastal radar sites, anti-ship missile capabilities and more than 60 Islamic Revolutionary Guard Corps boats.
Iran, meanwhile, accused Washington of violating the memorandum.
Posting on X, Mohammad Bagher Ghalibaf, speaker of the Iranian Parliament and a member of Tehran's negotiating team, listed what he described as “major MoU violations” by the US, including “violating Iranian adjustments in the Strait”, “persistent threats of further strikes”, “reinstating oil sanctions and attacks on southern Iran”.
“The era of bullying and extortion is over. It leads nowhere. We don’t fold,” Ghalibaf said.
Queries emailed to the ministry of petroleum and natural gas and refiners Indian Oil Corp. Ltd, Hindustan Petroleum Corp. Ltd, Bharat Petroleum Corp. Ltd, Reliance Industries and Nayara Energy were not immediately answered.