India weighs Cape route as Iran war threatens oil supply

Oil prices rose about 1% on Wednesday as the West Asia conflict intensified and Tehran signaled it could block the Strait of Hormuz, a chokepoint through which roughly a fifth of the world’s oil and LNG flows pass. With Hormuz potentially closed for a prolonged period, India, the world’s third-largest oil importer, could face tighter supply and higher prices. Shipping companies have started rerouting vessels around Africa to avoid Hormuz, a move that underscores how geopolitics can reshape energy access.

The Cape of Good Hope has come into sharper focus as an alternative route. The headland on the Atlantic coast of South Africa was named for its promise of opening sea routes to India and Asia, though it remains a long, costly passage compared with through-the-Suez options. When Hormuz is blocked, the Cape route becomes a go-to backstop, but the longer voyage and higher shipping costs are significant trade-offs.

In New Delhi, policymakers are weighing options to shield the oil-gas supply chain from disruption. India has previously announced a fuel emergency plan and is assessing additional routes and supplier diversification to absorb shocks and keep prices in check for households and industry. Industry observers caution that shifting away from Hormuz would demand careful logistics planning and stronger risk management across ports, insurance, and bunkering facilities.

The immediate test for India and other importers will be balancing energy security with cost, as global markets monitor how long Hormuz might stay closed and how quickly alternative routes can scale to meet demand. The Cape route’s appeal lies in its reliability in theory, but its real-world viability will hinge on the duration of the Hormuz disruption and the corresponding price dynamics.

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