Hormuz crisis: Wake-up call for India’s shipbuilding industry

The Strait of Hormuz is a narrow maritime passage linking the Persian Gulf with the Gulf of Oman and the wider Indian Ocean. It matters to India because the country imports major volumes of crude oil and gas through shipping routes connected to the Gulf. Oil and gas account for nearly 28% of India’s trade volume.

The crisis showed how access can be restricted even when international law recognises transit passage. Iran has used a permit system run by the Persian Gulf Strait Authority, while blacklisted vessels face possible detention or fines. Any disruption can therefore delay or endanger energy cargoes.

India has used diplomacy, naval initiatives, alternative suppliers and rerouting to keep imports moving. Yet over 90% of India’s trade travels on foreign-owned or foreign-flagged ships. Expanding Indian-flagged energy carriers and building ships domestically would give India greater control during future disruptions.

The collapse in traffic was dramatic. Average daily vessel transits through the Strait of Hormuz fell from 130 before the war to less than 10 by mid-October 2026. That reduction shows how severely the crisis has disrupted one of the world’s most important shipping routes.

India’s own overseas fleet is much smaller than its total registered fleet. The article counts roughly 1,554 Indian-flagged vessels, but only 492 trade overseas. The overseas fleet includes just 135 oil tankers and 28 gas carriers, limiting India’s ability to move essential energy cargo independently.

This mismatch creates a strategic vulnerability. India may secure passage for its own flag, but few Indian ships are available to carry the country’s trade. The government therefore plans to add 62 vessels in 2026–27 and support a joint venture intended to acquire 59 more energy ships.

A country’s diplomatic agreement for passage generally protects vessels flying its own flag, not every ship carrying its cargo. India secured favourable access for Indian-flagged vessels during the first half of 2026. But Indian-flagged ships carry only about 5% of India’s trade, leaving most cargo dependent on foreign operators and registries.

This distinction mattered because more than 90% of India’s trade moves on foreign-owned or foreign-flagged ships. Foreign vessels carrying Indian cargo could face different treatment under Iran’s permit system and Non-Compliance List. Their nationality, ownership and registry affected their access and exposure.

The result was incomplete protection. India kept some energy and critical cargo moving through diplomacy, naval measures, alternate oil sources and rerouting. However, these steps could not cover the larger foreign-carried share. The crisis therefore strengthened the case for expanding India’s own fleet and domestic shipbuilding capacity.

In April 2026, Iran’s Islamic Revolutionary Guard Corps seized Epaminondas, a container ship flying the Liberian flag. The vessel was carrying cargo bound for Mundra Port in Gujarat. The seizure directly connected the Hormuz crisis to Indian-bound commercial cargo.

The key mechanism was the separation between cargo destination and vessel nationality. Although the ship was carrying goods for India, it was not Indian-flagged. India’s diplomatic and naval arrangements secured passage for Indian-flagged vessels, but those arrangements did not automatically protect foreign-flagged ships carrying Indian cargo.

The incident reveals a broader trade risk. India relies heavily on foreign shipping lines, so disruptions can affect its imports even when its own government negotiates access. It also reinforces the need for more Indian-flagged vessels, especially tankers and gas carriers, and for Indian-owned ships built in domestic yards over the longer term.

India is expanding its own shipping capacity because foreign carriers move most of its trade and charge heavily for doing so. The immediate goal is to increase Indian-flagged vessels, particularly those capable of carrying crude oil and LPG. This would give India more direct control over essential imports during maritime disruptions.

The roadmap includes adding 62 vessels in 2026–27. A planned Shipping Corporation of India–oil PSU joint venture would acquire 59 vessels for India’s energy imports. The government is also providing financial support through the Bharat Maritime Insurance Pool, helping address risks faced by Indian shipping interests.

These measures complement diplomacy, naval initiatives, import diversification and vessel rerouting. They do not instantly replace foreign shipping lines, however. India’s longer-term strategy is to combine fleet expansion with domestic shipbuilding support, including financial assistance, a maritime development fund and new shipbuilding clusters.

Chartering foreign ships is a short-term solution. It helps Indian companies transport cargo, but the vessels remain controlled by foreign owners, operators or registries. Their access during a crisis may depend on another country’s flag, commercial decisions or permission from authorities. Domestic shipbuilding creates assets that can support India’s own long-term maritime needs.

The article links this vulnerability to energy imports. Indian oil companies spent about $8 billion over five years chartering foreign ships. India also pays around $75 billion annually in freight to foreign shipping lines. Building ships in Indian yards would reduce reliance on these external services and expand capacity for tankers, gas carriers and other cargo vessels.

The benefits will take time because shipbuilding is capital-intensive and slow to develop. A ₹70,000 crore government package supports yard costs, financing and expansions through new clusters. Domestic yards could eventually provide Indian owners with more ships, stronger supply chains and greater resilience during future disruptions.

A ship’s ownership, management and registration are separate arrangements. An Indian company could own cargo on board, a foreign company could operate the vessel, and the vessel could be registered in Liberia or another country. The flag is the legal nationality of the ship for maritime purposes. This distinction is general maritime practice; the article specifically highlights foreign ownership and foreign flags.

During the Hormuz crisis, Iran created a permit system through the Persian Gulf Strait Authority and maintained a Non-Compliance List. Blacklisted vessels faced threats of detention or fines. A ship’s flag could therefore affect how its passage was assessed, even when it carried cargo bound for India.

The Epaminondas illustrates the risk. It was Liberia-flagged, carried cargo for Mundra, and was seized by Iran’s IRGC. India’s access arrangements for Indian-flagged vessels did not automatically protect it. More Indian-owned, Indian-flagged ships would give India greater direct control.