This concentration left India heavily exposed to regional disruptions. When tensions escalated, several Very Large Gas Carriers (VLGCs) including Shivalik, Nanda Devi, and Jag Vasant were stranded around Ras Laffan, unable to transit through the strategic chokepoint. Saudi Aramco's 550,000 b/d Ras Tanura refinery also halted operations after being struck by Iranian drone debris, further tightening supply.
India's storage capacity of approximately 1 million tonnes represented only one-third of monthly demand, limiting buffer capacity. With 330 million households relying on LPG as primary cooking fuel, the stakes were enormous. The Ministry of Petroleum and Natural Gas immediately implemented a strict supply prioritization hierarchy: households first, essential services like hospitals second, and commercial users last.
The most dramatic shift came from the United States. From just 8% of India's LPG imports in February 2026, the US surged to nearly one-third by April.
This agreement, representing about 10% of India's annual LPG import requirement, marked India's first-ever structured US LPG contract.
The timing proved fortuitous. The US-China trade tensions had already redirected US LPG exports toward alternative markets, with India increasing US imports 13-fold in 2025. When the Middle East crisis hit, this pre-positioned capacity allowed immediate scaling. First term supplies began arriving in January 2026, with HPCL receiving a 23,000-tonne cargo at Vishakhapatnam and IOC receiving 22,100 tonnes at Ennore.
Iran re-entered India's import basket, contributing approximately 6% of imports by April 2026. This provided an alternative West Asian source less dependent on the Strait of Hormuz transit route. Beyond the US and Iran, India accelerated sourcing from Argentina, Chile, France, and the Netherlands, creating a multi-continental supply network that reduced West Asia dependence from 90% to approximately 55% within two months.
However, this diversification came at a cost. Shipping from the US Gulf Coast requires 30-45 days versus 7-10 days from the Gulf. Latin American shipments take 25-35 days, and European shipments require 20-30 days.
The conflict triggered a sharp increase in global LPG prices. The Saudi Aramco Contract Price, the benchmark for Indian imports, rose 46% between February and June as markets priced in supply risks and elevated freight costs. Yet the price of a 14.2-kg household LPG cylinder in Delhi rose only about 10% during the same period, while the price of a 19-kg commercial cylinder surged more than 79%.
This asymmetric price transmission created massive under-recoveries for state-run oil marketing companies.
Cumulative losses borne by fuel retailers during March-May were estimated at nearly ₹22,000 crore. The government had approved ₹30,000 crore in compensation to offset LPG under-recoveries, but the gap between actual losses and government support continued to pressure OMC balance sheets.
The supply disruptions and elevated prices significantly affected domestic consumption. LPG consumption fell to 2.47 million tonnes in April from 3.2 million tonnes in February. After growing 6% to a record 33.2 million tonnes in fiscal 2026, LPG consumption declined 13% year-on-year in both March and April, before falling 20% in May.
Commercial and industrial users bore the brunt of the decline. With market-linked pricing exposing them to the full 79% price surge, restaurants, hotels, and industrial users reduced consumption by 25-40%. The National Restaurant Association of India, representing over 500,000 restaurants employing 8 million people, warned of widespread business closures. In contrast, household consumers, protected by just a 10% price increase and government subsidies, reduced consumption by only 3-5%.
The easing of tensions in West Asia and the potential reopening of key trade routes are expected to reduce immediate supply concerns and moderate global LPG prices. Saudi Aramco Contract Price is projected to decline 20-25% from peak levels, while freight costs could drop 60-75%. This would reduce under-recoveries to ₹200-300 per cylinder and provide substantial relief to OMCs.
However, the disruption exposed India's continued dependence on imported LPG, which meets roughly 60-63% of demand. The experience with freight market volatility and geopolitical risks has reinforced the need for strategic domestic production expansion. Options include refinery debottlenecking, gas processing expansion, and dedicated LPG plants requiring an estimated investment of ₹38,000-60,000 crore for 8-13 MTPA additional domestic capacity.
The crisis has fundamentally altered India's approach to LPG security. The country is moving toward a multi-layered framework combining diversification, domestic capacity development, strategic storage reserves, and market-based pricing mechanisms. The goal is clear: never again be held hostage by a single shipping lane or region. The cost of this insurance may be high, but as the conflict demonstrated, the price of vulnerability is far higher.
