The US-Iran war may have triggered one of the biggest oil supply disruptions in history, yet crude prices have so far seen only a limited spike. The bigger question is how long this can last.
With the conflict showing no signs of ending, the global oil market has managed to weather the first few months relatively well. But if the war continues for another six months, the slow-building supply shock could eventually hit the global economy — and India — much harder.
The US Energy Information Administration (EIA), in its August outlook, estimates that oil production and trade patterns may not generally return to pre-conflict levels until early 2027. It also expects oil prices to remain elevated until global oil flows normalise and inventories are replenished.
The International Energy Agency (IEA), meanwhile, estimates that global oil supply will fall by 4.3 million barrels per day, or around 4%, this year.
So, how long can the world absorb the disruption — and how exposed is India?
What’s prevented an oil crisis till now?
The global oil market has so far been cushioned by emergency reserves, weaker demand and strategic stockpiles.
As the Middle East conflict unfolded and traffic through the Strait of Hormuz came to a standstill, the IEA announced an emergency release of 400 million barrels from member countries’ reserves in March — the largest coordinated release of oil stocks in its history. The agency has also indicated that additional supplies could be released if the situation deteriorates.
The US has been drawing down its Strategic Petroleum Reserve, which Reuters reported had fallen to its lowest level since January 1983.
China’s decision to reduce oil imports and draw on its strategic reserves has also helped prevent the supply-demand gap from widening further. While the supply loss from the Gulf is estimated at around 11 million barrels per day, the actual deficit against global demand is closer to 5 million barrels per day.
At current levels, global crude inventories could theoretically cover several months of the shortfall. However, not all stored oil can be released immediately, making the calculation more complicated.
Slippery road ahead: How long can the world take the hit?
The biggest uncertainty is the duration of the conflict.
According to a Reuters analysis, global oil stocks are already under pressure, but it remains difficult to assess whether existing reserves will be sufficient because nobody knows how long the disruption will continue.
Saudi Aramco estimates that the world has lost as many as 2.6 billion barrels of oil since the conflict began — the largest cumulative disruption since the 1979 Iranian revolution. That is equivalent to around 25 days of pre-war global consumption.
Government and commercial stocks held within IEA countries are theoretically sufficient to cover the current 5-million-barrel-per-day deficit for roughly 300 days. However, only a portion is readily releasable, bringing the practical coverage to around 180 days.
OPEC estimates global oil stocks at roughly 8 billion barrels, including commercial inventories, strategic reserves and oil in transit.
The US holds around 700 million barrels in its Strategic Petroleum Reserve, while confirmed US inventories stand at about 350 million barrels after falling by roughly 100 million barrels since March. China is estimated to hold between 1 billion and 1.4 billion barrels, while India has around 100 million barrels.
But headline inventory numbers do not tell the whole story.
“Overall, global oil inventories remain substantial, but only a portion is readily available to offset a major supply disruption,” said Praveen Rai, Director at Grant Thornton Bharat.
Oil stocks are also unevenly distributed geographically. Much of the inventory is held as strategic or operational stock, and countries are unlikely to release large quantities for export if doing so threatens their own energy security.
Logistical constraints, crude quality, refinery configurations and regional supply preferences further limit how much stored oil can actually reach the markets that need it.
Additional production from the UAE, US, Guyana, Brazil and potentially Venezuela could slow the rate at which inventories are depleted. However, producers outside OPEC generally need months to significantly increase output.
This means spare capacity can soften a supply shock but is unlikely to completely offset a prolonged loss of Gulf supplies.
Another major problem is logistics. According to Naveen Das, Senior Crude Oil Analyst at Kpler, the central bottleneck is not storage capacity but the ability to physically move crude out of the Gulf through limited bypass pipelines, while rerouting and congestion are already contributing to higher floating storage.
As a result, emergency stock releases are becoming increasingly difficult as countries deplete their available reserves.
China emerges a major player
China could play a significant role in determining how long the global market can absorb the disruption.
Although Beijing does not publicly disclose the size of its strategic reserves, higher estimates put its crude inventory at around 1.7 billion barrels. At that level, China could theoretically cover its pre-war Hormuz imports of roughly 5.5 million barrels per day for almost a year.
China has already reduced its crude imports by around 30–35% since the war began, easing pressure on the global market.
If the crisis continues, China is likely to remain an important stabilising force through lower imports, adjustments to refinery operations and the use of domestic inventories.
However, China is unlikely to release its reserves simply to support global markets. Its priority will remain domestic energy security.
Kpler estimates that China could potentially release 1–2 million barrels per day over a six-month period, or around 180–360 million barrels in total. That could reduce China’s own import requirements and indirectly make more oil available elsewhere, but it would not amount to a deliberate effort to stabilise the global market.
China is not part of the IEA’s coordinated stock-release mechanism and traditionally treats its oil reserves as a strategic national asset. Its reserves therefore represent an important buffer, but not a solution capable of fully offsetting a prolonged and major supply disruption.
What it could mean for India
India’s diversified crude sourcing strategy could help protect it from a physical supply shortage.
India imports almost all of its crude but has increasingly diversified its sources. According to Kpler’s Naveen Das, Russian crude now consistently accounts for around 60–75% of the oil on its way to India, alongside supplies from Brazil, the US and West Africa.
This means India is less exposed to a prolonged disruption than an importer heavily dependent on Gulf supplies.
But securing enough crude is only part of the problem.
If global supplies continue to tighten, India will have a smaller pool of oil from which to buy. China, having already drawn down some of its strategic reserves, could also compete for available supplies.
The result would be higher prices and a larger import bill. Alternative supplies can also involve higher freight costs, premiums and less favourable pricing.
“The real costs are higher freight from longer voyages, refinery adjustments to run non-Gulf crude, and price: India still pays global benchmark prices, so a persistent global deficit means continued high and volatile costs even as its physical supply holds up,” Das said.
India also faces another potential complication: a proposed US sanctions measure that could allow the Trump administration to impose tariffs of up to 100% on major buyers of Russian oil.
Such measures could put pressure on Indian refiners with significant exposure to Western markets. However, experts expect energy security to remain a priority, particularly during a global supply disruption.
India is therefore likely to continue adjusting its crude basket according to availability, price, refinery compatibility and geopolitical considerations rather than abandoning Russian oil solely because of tariff pressure.
For India, then, the immediate risk may not be running out of crude. It is the rising cost of securing it.
The longer the war continues, the more the global market will have to rely on dwindling accessible inventories, alternative producers and increasingly complicated trade routes. If the conflict stretches well into 2027, the buffers that have so far prevented a full-scale oil crisis could become considerably harder to maintain.
