According to an analysis by the Center for Energy and Clean Air Research (CREA), the crisis in the Strait of Hormuz led to an increase in India's gross expenditure on fossil fuel imports by approximately $22 billion between March and August 2026. This energy shock made India the second most affected importing country after China.
CREA data indicates that India's net additional costs for crude oil amounted to $20.5 billion. Overall, India's net additional expenses for all types of fossil fuels are estimated at $14.4 billion, equivalent to 0.38 percent of its GDP or about 1.4 days of national income.
What was the economic impact?
India's additional expenditures from March to August ranked third among major fossil fuel importers, trailing the European Union with expenditures of $78 billion and China with expenditures of $35 billion, according to the CREA study covering seaborne crude oil, petroleum products, and liquefied natural gas (LNG). These figures reflect the amount importers paid above the expectations of futures markets before the incidents.
CREA reports that over six months following the US-Iran war, fossil fuel importers incurred total additional costs of $330 billion for seaborne crude oil, petroleum products, and LNG compared to pre-war futures market forecasts. Crude oil accounted for the largest share—$164.1 billion, followed by diesel and gas oil ($73.8 billion), gasoline ($35.7 billion), LNG ($38 billion), and aviation fuel ($20 billion).
It is also noted that this calculation does not account for the additional profits of countries that are fossil fuel exporters. The US-Iran war caused the longest oil price shock since the Persian Gulf in 1990. Among importers, typical low- or middle-income countries paid roughly twice as much relative to GDP as typical high-income countries. The cost of the crisis for fossil fuel importers is equivalent to all global investments in renewable energy in 2025 on a monthly average basis.
How sharply did crude oil prices rise?
Brent crude prices reached nearly double their pre-incident levels within a few weeks of the events and have since averaged 38 percent higher. Among major supply shocks in the last three decades, only the 1990 Persian Gulf war demonstrated a more significant increase. For 94 percent of trading days, oil traded above pre-incident levels. Brent briefly dropped below pre-crisis levels at the end of June 2026 before surging to $105 per barrel on July 23 and then stabilizing. The average for July was $84 per barrel, and the average Brent price for the period from March to August 2026 was $93 per barrel. In the last six months, there has been no such high average Brent price as after the price surge that concluded in December 2022, when markets were still absorbing the consequences of Russia's full-scale invasion of Ukraine.
Fuel price pressure persists
Pressure on refined fuels proved more resilient than on crude oil. CREA indicated that the crude oil premium compared to pre-crisis expectations decreased from about 50 percent in May to 22 percent in August. Conversely, diesel was 57 percent above expectations in March and 65 percent higher in August. European gas prices rose from 44 percent above expectations in June to 76 percent in August, while Asian LNG prices increased from 64 percent to 98 percent above expectations during the same period.
Gas price shock reaches India's domestic fuel market
The crisis in the Strait of Hormuz also impacted LNG imports into India. According to CREA estimates, over six months after the incidents, India paid 29 percent more per ton of imported LNG than expected by the market, while import volumes fell by 26 percent. The total bill for India's LNG imports during this six-month period was about $4.7 billion, of which approximately one-fifth represented additional costs due to the price shock. CREA estimated the additional costs for LNG imports at $1.1 billion for the entire six-month period. The sharpest drop occurred in March, when India's LNG imports fell by 49 percent compared to the average of the previous two years. By June, volumes recovered to 86 percent of this benchmark.
Simultaneously, the share of US-produced LNG in India's imports increased from 8 percent in February to 16 percent in March and 32 percent in April, partially replacing lost supplies from the Persian Gulf. The increase in costs calculated by import parity was also significant. CREA calculated that a standard 14.2 kg LNG home cylinder cost about $8.1 during the March-August import parity compared to $6.28 under pre-crisis expectations. This represents an increase of approximately $1.8 per refill, or 29 percent. These figures are presented before accounting for subsidies, taxes, and trade tariffs and therefore do not reflect the retail price paid by households.
Clean energy mitigates the shock
CREA's analysis also highlights the role of expanding clean energy production in India and other countries in reducing vulnerability to fossil fuel price shocks. It is estimated that clean energy generation capacity added since 2020 helped importing countries save $36 billion on coal, gas, and oil imports during the first five months of the crisis. Of this amount, $22 billion was saved by preventing gas imports, $10 billion by coal, and $5 billion by oil.
China recorded the largest absolute savings at $7.9 billion, followed by Japan with savings of $4.9 billion. Other countries with significant savings included Spain, France, Italy, the Netherlands, Brazil, and India. For India, the analysis used national data on daily power generation from POSOCO.
Poorer economies bear a greater burden
The impact of the energy shock was uneven across different economies. CREA estimated that a typical low- or low-middle-income fossil fuel importer paid an additional amount equivalent to 1 percent of GDP, compared to 0.45 percent for a typical high-income importer. Among the 20 largest payers, Egypt faced the highest burden relative to its economy—1.33 percent of GDP, followed by Chile at 0.79 percent and Thailand at 0.74 percent. China had the highest absolute net costs at $31.7 billion, but this constituted only 0.17 percent of its GDP. India's net costs of $14.4 billion amounted to 0.38 percent of GDP.
CREA noted that its assessment is conservative because it excludes several crisis-related costs, including pipeline gas, coal, fuel oil, naphtha, freight rates, war risk premiums, and other components affecting consumer prices. Furthermore, it measures additional costs for actually purchased fuel and does not quantitatively assess the economic losses from fuel that consumers or businesses could not afford due to price increases. The report compared actual prices and seaborne fuel receipts from March to August with futures curves active from February 16 to 27, i.e., 12 days before the incidents. Prices for August and some trade volumes were partially modeled as the analysis was completed before the full settlement of that month.