How would India cope if Strait of Hormuz disruption lasted longer? AI simulation reveals risks
An AI-driven simulation by The Asia Group examined how India would respond to a prolonged closure of the Strait of Hormuz. The model showed that India could manage the first 90 days of disruption but would face growing fiscal strain and economic challenges thereafter. Continued blockage would pressure household energy costs and push the fiscal deficit above the FY2026‑27 target.
- ▪The simulation modeled interactions among the Government of India, the Reserve Bank of India, Parliament, large industries, and SMEs over a 180‑day period.
- ▪India’s initial response relied on fuel subsidies, tax cuts, price caps and strategic petroleum reserve swaps, which limited immediate energy shocks but increased fiscal deficits.
- ▪By mid‑December, the fiscal deficit consistently exceeded the 4.8% of GDP target, reaching between 5% and 5.3% of GDP in the simulations.
- ▪If the disruption persisted beyond three months, households would feel higher cooking‑gas prices and reduced LPG subsidies, indicating deeper economic stress.
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How would India cope if Strait of Hormuz disruption lasted longer? AI simulation reveals risksIn the scenarios, India was able to manage the crisis during the first 90 days, but it became a lot more challenging after that period.Updated on: Jun 30, 2026 12:07 PM ISTEdited by Karishma AyaldasaniPrefer HTon GoogleShare viaCopy link The Strait of Hormuz has been at the centre of tensions between the United States and Iran since the war began on February 28. Following strikes by the US and Israel, Tehran responded by effectively closing the strait, which carries nearly a fifth of the world's oil and a significant share of global liquefied natural gas (LNG).A fresh round of hostilities has once again put the Strait of Hormuz at the centre of global attention.
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