Will easing Iran sanctions reshape India’s oil imports?

After months of war, failed ceasefires, and brinkmanship over the Strait of Hormuz, a Pakistan-brokered agreement has opened a 60-day window for talks — and the immediate lifting of the US naval blockade on Iranian ports.

This means unhindered production, sale, delivery and import of Iranian crude oil and petroleum products until August 21. For India, which meets nearly 85 percent of its crude oil demand through imports, this could offer some relief.

At a time when the country, to navigate the Strait of Hormuz crisis, has reported record oil shipments from Russia and diversified crude imports from across 40 countries, easing US sanctions on Iran could open access to another major source supply. It could also add to India’s strategic flexibility and strengthen its negotiating power.

Once a major importer of Iranian oil, India stopped purchasing it in 2019 due to US sanctions, making only a brief exception in April.

The US Treasury has now issued a temporary general licence permitting transactions involving Iranian crude oil, petroleum products and petrochemicals, along with associated services such as shipping, insurance and banking. The move follows Iran’s agreement to allow nuclear inspections by the International Atomic Energy Agency.

Reports said the National Iranian Oil Company has reached out to oil companies across the world, including Indian refiners. However, Indian refiners are not rushing to place orders, amid caution over sanctions and evaluation of payments, insurance and pricing.

Refiners are currently assessing the trade risks, including sanctions and potential banking restrictions despite the US dollar-denominated transactions. They are seeking clarity from banks, insurers and compliance teams, while weighing whether the crude fits refinery configurations and if the landed cost, including freight and insurance, will be commercially viable.

A report in Indian Express said that trading teams are reviewing the techno-commercial feasibility of buying Iranian oil under the US-Iran arrangement.

Tensions in the Strait of Hormuz since February had disrupted nearly 20 percent of the world’s oil trade, with India significantly impacted. On March 26, Iran announced it would allow the transit of ships from five countries, including India.

Amid the crisis, India’s crude imports from Russia nearly doubled, from about 20 percent of total imports in February to 47 percent by March. With an average of 5 mbd crude import, it has reached 54 percent in June so far, according to reports.

India has also continued to rely on the Gulf region. The UAE is its second-largest crude supplier in June, while it imports crude from Saudi Arabia and Iraq as well. In 2025, OPEC countries accounted for around half of the country’s total crude imports. Among India’s other crude suppliers are Angola, Brazil, Iran and Venezuela.

Speaking to the Business Standard, Jim Burkhard of S&P Global Energy said that oil prices are expected to average between 80 and 90 dollars per barrel, while a lot depends on China, “which has cut purchases significantly”.

Meanwhile, Petroleum and Natural Gas Minister Hardeep Singh Puri has indicated that petrol and diesel prices could be reduced if the lower-priced crude recently purchased reaches the refiners. He added that domestic fuel prices have seen only a limited increase despite sharp volatility in global oil markets.

Puri said, “There are 193 countries in the United Nations and only Japan has seen a lower increase in petroleum prices than India.”

The domestic fuel prices were hiked four times within 10 days in May. In Delhi, the price of petrol breached the Rs 100-mark after four years – last reaching that level in May 2022 during the Russia–Ukraine conflict.