How the Iran-US War Could Impact the Gas Industry in India

Geopolitical conflicts often have far-reaching economic consequences, especially for energy-dependent economies. The escalating tensions between Iran and the United States have already begun disrupting global energy markets. For India one of the world’s largest energy importers the gas industry is particularly vulnerable. From rising LNG prices to supply disruptions and industrial slowdowns, the conflict could significantly reshape India’s natural gas landscape.

India’s Heavy Dependence on Imported Gas

India relies heavily on imports to meet its growing energy demand. Natural gas, primarily imported as liquefied natural gas (LNG), plays a crucial role in powering industries, fertilizer production, city gas distribution networks, and electricity generation.

India imports over 25 million metric tonnes of LNG annually, making it the fourth-largest LNG consumer globally. A significant portion of these imports over 40% comes from Qatar, while a large share of the country’s overall energy supply originates from West Asia.

Moreover, West Asia accounts for around 68% of India’s LNG imports and more than 91% of its LPG imports, highlighting the country’s heavy dependence on the region.

This high concentration makes India particularly vulnerable to geopolitical disruptions such as the Iran–US conflict.

Supply Chain Disruptions in the Strait of Hormuz

One of the most significant risks comes from potential disruptions in the Strait of Hormuz, a crucial maritime route for global energy shipments. Around 50-60% of India’s LNG imports and a large share of crude shipments pass through this route, making any blockade or security threat a major concern.

If the conflict escalates and restricts shipping through the strait, LNG shipments to India could be delayed or reduced. Even temporary disruptions can create severe supply shortages in the domestic gas market.

Energy analysts warn that halting LNG flows through this route could disrupt nearly 20% of global LNG supply, causing sharp price spikes worldwide.

Rising LNG Prices and Cost Pressures

Another major impact of the Iran–US conflict is the surge in global energy prices. Geopolitical tensions have already triggered increases in oil and natural gas prices due to fears of supply shortages.

For India, higher LNG prices directly translate into increased import bills. Since India imports nearly 85% of its crude oil and a significant portion of natural gas, rising global prices can push up domestic fuel costs and inflation.

Higher gas prices affect several sectors, including:

Fertilizer manufacturing

Power generation

City gas distribution (CNG and PNG)

Industrial manufacturing

If LNG prices remain elevated for an extended period, many industries could face higher operational costs and reduced profitability.

Industrial and Manufacturing Impact

Natural gas is widely used across India’s industrial ecosystem. Fertilizer plants rely on gas as a feedstock, while industries such as petrochemicals, ceramics, glass, and steel depend on it as a fuel source.

Due to supply disruptions from the Middle East conflict, some gas importers have already restricted domestic gas supplies under force majeure clauses, impacting sectors like fertilizer production.

Industrial clusters that rely on pipeline gas could also face production slowdowns. In extreme scenarios, companies may need to switch to alternative fuels such as coal, diesel, or electricity—often at higher costs.

Impact on City Gas Distribution and Consumers

The city gas distribution (CGD) sector responsible for supplying CNG for vehicles and PNG for households may also feel the impact. Limited LNG availability could force authorities to prioritize domestic and residential consumption over commercial or industrial usage.

In such cases, industries may experience reduced gas allocation, while household gas supply remains relatively stable. However, rising import costs could eventually result in higher consumer prices for cooking gas and CNG.

Strategic Shifts in India’s Energy Policy

The Iran-US conflict may accelerate India’s efforts to diversify its energy sources and reduce dependence on a single region. Policymakers are already exploring alternative supply routes and suppliers to secure energy imports.

India has begun increasing imports from countries such as the United States, Norway, and Russia to offset disruptions in Gulf energy supplies. This diversification strategy aims to improve energy security and reduce geopolitical risk.

Additionally, the crisis could boost investments in:

Domestic natural gas exploration

Renewable energy infrastructure

Hydrogen and alternative fuels

These long-term strategies will help India strengthen resilience against future energy shocks.

The Iran–US war has the potential to significantly disrupt India’s gas industry by increasing LNG prices, interrupting supply chains, and putting pressure on industrial operations. With a large share of its energy imports originating from the Middle East, India remains highly exposed to geopolitical instability in the region.

However, the crisis also presents an opportunity for India to accelerate energy diversification, strengthen domestic production, and invest in alternative energy technologies. Companies and policymakers that proactively adapt to these changing market dynamics will be better positioned to navigate the evolving global energy landscape.

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