The ongoing crisis in West Asia and potential disruptions around the Strait of Hormuz may place short term pressure on India crude oil supply chain. However, diversified import sources and existing inventories are likely to help limit the immediate impact, according to a report by Morgan Stanley. The brokerage highlighted that India remains highly dependent on oil shipments passing through the Middle East. Around forty to fifty percent of the oil consumed by India and China moves through the Strait of Hormuz, making Asian energy supply chains vulnerable to any disruption in the region.

A large share of India crude imports also comes directly from Middle Eastern producers. Morgan Stanley estimates that about forty six percent of India crude basket is sourced from this region, showing the country strong reliance on Gulf suppliers to meet its refining needs. Despite these risks, the report noted that existing stockpiles and alternative sourcing options should help prevent an immediate supply shock. Crude and petroleum product reserves across the Asia Pacific region range from thirty to two hundred days, and countries such as India have already begun securing supplies from alternative producers.

To reduce potential supply risks, India has increased imports of discounted Russian crude oil and is exploring additional supply routes. The report added that India has been stepping up purchases of Russian Urals crude after the United States temporarily eased sanctions on Russian oil imports for thirty days. At the same time, India is in discussions with Iran to ensure safe passage for tankers carrying LPG and crude, including more than twenty vessels.

While supply concerns remain, Morgan Stanley believes India refining sector could benefit if the disruption continues. Limited supply and export restrictions across Asia have pushed refining margins higher. Prices of refined products such as gasoline, diesel, jet fuel, naphtha and fuel oil have increased by eighteen to thirty percent in the past week as markets tightened.

Refiners with diversified crude sourcing, especially large integrated companies and state owned oil marketing firms, could see stronger profitability due to higher product margins. Morgan Stanley estimates that a one to one point five dollar per barrel increase in refining gross margins could result in a fifteen to thirty percent rise in earnings by 2026. The report stated that the duration of the West Asia crisis will play a crucial role in determining the outlook. While inventories and alternative supply sources offer short term protection, a prolonged disruption could increase pressure on energy supplies and industrial activity across Asia.