India’s $22 billion energy shock: How the Hormuz crisis drove up fossil fuel costs

India incurred an estimated $22 billion in additional gross fossil-fuel import costs between March and August 2026 following the energy-price shock triggered by the Hormuz crisis, according to an analysis by the Centre for Research on Energy and Clean Air (CREA) cited by Business Standard.

India was the second-most affected importing country after China in terms of gross additional costs. Its net additional cost for crude oil alone stood at $20.5 billion.

India’s overall energy burden

CREA estimated India’s net additional cost across fossil fuels at $14.4 billion, equivalent to 0.38 per cent of the country’s GDP or around 1.4 days of national income.

The European Union recorded the highest additional cost among major importers at $78 billion, followed by China at $35 billion. The figures cover seaborne crude oil, oil products and LNG and compare actual costs with futures-market expectations before the strikes.

Globally, importers paid an estimated $330 billion more during the six months following the US-Iran war than markets had anticipated. Crude oil accounted for $164.1 billion, followed by diesel and gasoil at $73.8 billion and LNG at $38 billion.

Crude and fuel prices remain elevated

Brent crude prices climbed to almost twice their pre-strike level in the weeks following the strikes and averaged 38 per cent above that level during the period.

Brent spot prices averaged $93 a barrel between March and August, while the July average was $84 a barrel. Prices briefly dipped below pre-strike levels in late June before reaching $105 a barrel on July 23.

CREA said refined fuel prices remained under greater pressure than crude. Diesel was 57 per cent above expectations in March and 65 per cent higher in August.

LPG imports take a hit

India’s cooking fuel market also felt the impact. Imported LPG cost 29 per cent more per tonne than expected, while import volumes were 26 per cent lower.

India’s LPG import bill was around $4.7 billion over the six months, with approximately $1.1 billion attributed to the additional cost caused by the price shock.

Imports fell 49 per cent in March compared with the average of the previous two years, before recovering to 86 per cent of that benchmark by June.

The share of US-origin LPG rose from 8 per cent in February to 32 per cent in April, partly replacing Gulf supplies.

Clean energy provides some relief

CREA also estimated that clean-power capacity added since 2020 helped importing countries avoid $36 billion in coal, gas and oil imports during the first five months of the crisis.

India was among the countries recording significant savings from reduced fossil-fuel dependence.

The burden was heavier for poorer economies. Low- and lower-middle-income importers typically paid an additional amount equal to 1 per cent of GDP, compared with 0.45 per cent for high-income economies.

CREA said its estimate remains conservative as it excludes several costs, including pipeline gas, coal, freight rates and war-risk premiums.