India Dodged a Worse Oil Shock and It Has China to Thank for That

When the Strait of Hormuz closed in early March 2026, India took a direct hit. Over half of India’s crude oil and LNG imports transited that waterway. Within weeks, India’s average crude basket price surged from $69 per barrel in February to $113 per barrel in March a 64 percent increase in a single month. Supplies through the strait collapsed from 2.8 million barrels per day to just 247,000 barrels per day by April, a 91 percent reduction. Crude oil inventories fell sharply. The rupee slid to all-time lows.

It was a severe shock. It could have been catastrophic. And the reason it wasn’t has as much to do with Beijing as it does with New Delhi’s own crisis management a geopolitical irony that neither government has any interest in advertising.

China’s Demand Cut Quietly Capped Global Prices

The single most important stabilizing force in global oil markets during the Hormuz crisis was not the US emergency response, not Saudi Arabia’s production pledges, and not India’s diversification scramble. It was China’s decision to sharply cut the amount of oil it was importing from global markets.

Axios reported the analysis bluntly: “Since the start of the conflict, China has sharply cut the amount of oil it imports and that has kept a lid on global oil prices. If Chinese imports had stayed at prewar levels, oil prices would almost certainly be significantly higher today.”

China’s reasoning was rational and self-interested. With strategic and commercial oil stocks covering well over 120 days of net imports compared to India’s roughly 30-day buffer China could afford to draw down reserves rather than compete aggressively for scarce spot cargoes. The effect, unintended or not, was to reduce demand pressure at precisely the moment supply was most constrained. For India, which had no such reserve cushion and was scrambling to replace lost Hormuz volumes from anywhere available, China’s demand restraint meant Brent crude stayed closer to $80-100 rather than spiking past $130 a difference that, compounded across millions of barrels, translated into tens of billions of dollars of avoided import costs.

China’s Iranian Oil Relationship Created a Back Channel

China’s role went beyond passive demand reduction. Beijing has invested over $100 billion in Iranian energy and infrastructure projects, making China Iran’s largest trading partner and giving it both the relationships and the financial infrastructure to keep Iranian oil moving even as Western sanctions tightened. CNBC reported that Chinese purchases account for roughly 90 percent of Iran’s total oil exports a lifeline that kept Iranian production revenues flowing into Tehran even as US strikes on Iran targeted its military infrastructure.

The indirect benefit to India materialized in a specific and unexpected form. When the US Treasury granted India a temporary 30-day emergency waiver in early March authorizing purchases of Iranian crude, Indian refiners needed a mechanism to settle those purchases without triggering secondary sanctions. OilPrice.com reported that transactions were settled in Chinese yuan via the Shanghai office of India’s ICICI Bank using the financial infrastructure China had built for its own Iranian oil trade. India accessed Iranian barrels through a payment architecture Beijing had constructed.

India’s Own Crisis Management

India’s response to the crisis was aggressive and pragmatic. The Indian Oil Corporation purchased 2 million barrels of Iranian crude in the first such transaction in seven years, ending the freeze on Iranian imports that US sanctions had enforced since 2019. Russian oil imports surged to approximately 1.9 million barrels per day by late March nearly double the pre-war volume of around 1 million bpd. Indian refiners simultaneously negotiated incremental crude cargoes from the US, West Africa, and Saudi Arabia, sourcing from more than 40 countries to reduce any single-point dependency.

S&P Global reported that the diversification came at a cost alternative crudes required different refinery configurations and carried higher freight premiums but it worked. India kept refineries running. Fuel shortages were avoided at the retail level. The shock was absorbed, if expensively.

The Competition China Won

The crisis also exposed a structural asymmetry that India’s policymakers cannot comfortably ignore. CNBC analysis noted that India and China competed fiercely for scarce Russian and Saudi barrels throughout the crisis and China, with its larger purchasing volume, longer-term supply contracts, and yuan-denominated payment infrastructure, consistently negotiated from a stronger position. China is 85 percent energy self-sufficient. India imports roughly 85 percent of its crude requirements. That asymmetry did not cause India’s crisis, but it shaped every aspect of how the crisis unfolded.

The New Lines Institute assessed that China’s structural advantages reserves depth, Iranian relationships, yuan payment systems, and self-sufficiency insulated it from the worst of the energy shock in ways simply unavailable to India.

India survived the worst oil shock in the history of the global market. It did so through its own resourcefulness, US diplomatic accommodation, and a paradoxical assist from the country it competes with most directly for energy resources and regional influence. Beijing did not intend to help New Delhi. But in this crisis, the effect was the same.