The Pakistan-brokered two-week ceasefire announced by the US and Iran in the West Asia war led to a significant fall in crude oil prices on Wednesday, with benchmark Brent crude shedding around 16% to trade at about $93 per barrel as of 12 noon India time. The initial market reaction reflects a sigh of relief, as oil prices had surged by over 50% in March due to the effective halt in vessel movements through the Strait of Hormuz—from where one-fifth of global oil and liquefied natural gas (LNG) passes—and the attacks on energy infrastructure in the Gulf. By many counts, it has been the worst energy crisis the world has even seen.Asia, including India, has particularly suffered due to supply disruptions and price surges because of the West Asia war. India depends on imports to meet over 88% of its crude oil needs, over 40% of which came via the Strait of Hormuz. The country depends on imports to meet half of its natural gas requirement, with 55-60% coming through the Strait. As for liquefied petroleum gas (LPG), India’s import dependency level is 60%, and 90% of those imports came through the maritime chokepoint.Although the temporary ceasefire brings some relief and hope, the energy market is still not fully writing off the risks associated with global oil supply and transits through the Strait of Hormuz. That is evident from the fact that oil prices are still over 30% higher than the pre-war levels, despite some easing. Currently, the ceasefire is temporary, and according to some experts fragile, with a more lasting and durable peace agreement still elusive. Flip-flops have been a hallmark of this war, particularly from the American side, and who is to say that this temporary arrangement is not going to be another one? The conflict is now entering the crucial phase of negotiation, and much will depend on what comes of those talks.“What we are witnessing is not resolution of conflict, but repositioning. The war has not ended. It has entered a different phase, where coercion and negotiation now proceed together. For India, the implication is clear. Do not read this as de-escalation alone. Read it as a system under strain, where outcomes are still fluid,” India’s former foreign secretary Nirupama Rao said in a post on X.Graphs, Data and Perspectives | Between oil shock and El Niño, how high can inflation go in India?The global energy market is in no mood to significantly discount the geopolitical risks associated with the Strait of Hormuz, also in view of Iran’s statement that stopped short of announcing fully free passage through the critical maritime chokepoint. Iran’s Foreign Minister Seyed Abbas Araghchi said that safe passage through the Strait of Hormuz will be possible for two weeks but “via coordination with Iran’s Armed Forces and with due consideration of technical limitations”. How shipping lines view these developments, and how keen they would be to send their ships back into the Persian Gulf to lift more cargoes also remains to be seen.Moreover, even if lasting peace comes to West Asia and the Strait, normal pre-war energy flows from West Asia cannot be restored immediately. Industry experts believe it would take months for most of the supplies to normalise. Gulf energy infrastructure like export terminals, refineries, oil fields, and LNG processing units could take months, even years in some cases, to get back to normal production levels.‘Higher for longer’ oil, LNG pricesThe temporary ceasefire and an opening up of the Strait of Hormuz could help evacuate large volumes of oil, petroleum fuels, and LNG on board ships stranded in the Persian Gulf—to the west of the Strait—over the coming days, improving the supply situation in the short term. About 180 million barrels of crude oil and refined fuels and over 1 million tonnes of LNG are stranded in the Persian Gulf, according to some estimates.Story continues below this ad“But clearing the backlog of cargoes is only part of the problem. Getting tankers out of the Gulf is one thing; persuading shipowners and charterers to send vessels back in is quite another. The unprecedented blockade of Hormuz has caused severe disruption to global shipping markets by sharply reducing tanker availability, pushing freight rates to record highs. Many shipowners are likely to remain extremely cautious about re-entering the region during what is, at best, a shaky and time-limited ceasefire, fearing their vessels and crews could once again become trapped if hostilities resume. That caution would in turn constrain any attempt to revive normal export flows,” Reuters columnist Ron Bousso wrote.Also Read | Kalpakkam fast breeder reactor attains criticality: why this is a ‘defining step’ in India’s 3-stage n-programmeThe disruption in flows through the Strait of Hormuz forced Gulf oil producers to shut in around 7.5 million barrels per day (bpd) of oil production in March, which accounts for roughly 7.5% of global oil supply, according to estimates by the US Energy Information Administration (EIA). In an April 7 report, the EIA said that production shut-ins will rise to 9.1 million bpd in April, even under the assumption that the conflict won’t persist beyond this month and that traffic through the Strait of Hormuz would gradually resume.“Under those assumptions, we expect production shut-ins will fall to 6.7 million bpd in May and return close to pre-conflict levels in late 2026,” the EIA said. Going by the EIA’s estimates and views from experts and analysts, it doesn’t look like West Asian oil and gas production and supplies would normalise quickly even if maritime traffic through the Strait were to normalise. This also means that energy prices are expected to remain elevated for a while, maybe not as much as the levels seen in recent weeks, but higher than the pre-war levels.In a March 20 report titled ‘If the war were to end tomorrow…’, international brokerage CLSA had said that any news on opening up of the Strait of Hormuz may drive a “reflex pullback in crude oil and LNG prices”; but it also foresaw a much tighter post war supply-demand for oil and LNG versus pre-war levels due to “risks on pace of restart of production from the Gulf as well as likely new re-stocking demand”. The view is shared by numerous energy market experts and analysts.Story continues below this ad“We believe that the war has fundamentally changed the demand-supply equation for the next few quarters versus the popular opinions held at the start of 2026. On the supply side, restart of oil as well as LNG feeding gas fields in the Hormuz countries may be a process running into a few months with uncertainty, with risk of some permanent loss in production levels of some wells. On the demand side, rising focus on energy security as well as depleting strategic inventory may drive demand for both crude oil as well as LNG to a higher level than envisaged a few months ago,” CLSA said, adding that the medium term reality after the war could see “higher for longer crude and LNG prices”.The India angleIndia, like various other nations, has been wishing for a quick end to the war and a rapid normalisation in global energy flows. The country’s heavy dependence on energy imports, with a sizable chunk coming from West Asia via the Strait of Hormuz, has led to a double whammy of supply tightness and price surge. While highly diversified crude sourcing has helped India in ensuring adequate oil, petrol, diesel, and jet fuel availability, it was forced to ration gas supplies to certain industries and commercial consumers in order to ensure adequate availability for households and a few priority sectors. Moreover, the surge in international prices of oil and gas has forced India to import oil and gas at extremely high rates, as the country had to prioritise supply security over price considerations.Also Read | Amid gas shortage, how greater reliance on coal-based power during summer spurs concerns of solar curtailmentGiven that India imports 1.8-2 billion barrels of crude oil a year, every $1-per-barrel increase in oil prices would bump up the country’s oil import bill by up to $2 billion on an annualised basis. According to a March report by Nomura, India is among the three most vulnerable Asian economies to high oil prices in terms of import bill and current account balances, the other two being Thailand and South Korea. It said that every 10% oil price increase typically widens India’s current account deficit by 0.4% of the GDP.The government has slashed excise duty on petrol and diesel by Rs 10 per litre, and oil marketing companies (OMCs) have not raised pump prices despite incurring heavy losses on the sale of the two fuels at pre-war levels amid a surge in oil and fuel prices in the international market. They are absorbing heavy under-recoveries on sale of LPG to households and jet fuel for domestic flights, where only a fraction of the price hike has been passed on.Story continues below this adTo cover the shortfall in oil supplies from West Asia, India ramped up oil imports for other countries, particularly Russia. Crude oil imports from Iraq and the UAE plummeted in March by around 70% on a month-on-month basis, while those from Saudi Arabia and Kuwait are down by about 45%, according to preliminary data from trade sources. On the other hand, oil imports from Russia jumped over 80% from February levels to about 2 million bpd, taking Moscow’s share in New Delhi’s oil imports to over 45% from 20% in February.India had, in recent months, cut down significantly on its oil imports from Russia amid trade negotiations with the US, as Washington made it a pre-requisite for scrapping its 25% additional penal tariff on New Delhi. But with the Strait of Hormuz closed for all intended purposes, Washington was keen that Russian oil be consumed by major oil importers, even from sanctioned entities and tankers. So, after issuing the US a temporary “waiver” specifically to Indian refiners for buying Russian crude that was already sitting in tankers on water, Washington extended the waiver to all countries.Apart from providing temporary relief to India, experts also see it as part of Donald Trump’s effort to prevent a further and sustained spike in international oil prices—and the consequent rise in domestic fuel prices in the US—given the midterm elections later this year. There are expectations that the waiver could be extended further till vessel flows through the Strait of Hormuz normalise. A similar waiver was later issued for Iranian oil already loaded on tankers, and India has secured some volumes of Iranian crude after a gap of seven years.According to the government, cargoes of LNG and LPG from non-West Asian suppliers have also been bought, even as supply constraints persist in these segments. The government has been in constant touch with Iran and other regional players to get its stranded energy cargoes, particularly LPG tankers, out of the Persian Gulf. So far, eight India-flagged LPG tankers have safely transited the fraught waters of the Strait due to these efforts, placing India in a select group of countries that have managed to secure safe passage for their ships from Tehran.