Hormuz Fallout Pushes India to Algeria for 2027 LPG, Boosting Energy Security

India's energy landscape is undergoing a significant shift as Indian Oil Corporation (IOC) has finalised a critical Liquefied Petroleum Gas (LPG) supply deal with Algeria state-owned Sonatrach for 2027. This strategic move, which involves monthly shipments of 45,000-55,000 tonnes of LPG, comes as India actively seeks to reduce its heavy dependence on traditional Middle Eastern suppliers following prolonged disruptions around the geopolitically volatile Strait of Hormuz. The agreement, based on a free-on-board (FOB) basis, also leverages Algeria reportedly lower LPG prices compared to the Saudi Aramco Contract Price (ACP), offering both supply diversification and potential cost benefits. The urgency for this diversification intensified dramatically after the Strait of Hormuz became largely blocked by Iran in February 2026, a direct fallout from the ongoing US-Israeli air war against the country. This maritime chokepoint, crucial for a quarter of the world's seaborne oil and 20% of its liquefied natural gas, has seen commercial shipping effectively grind to a halt, with war-risk insurance making transit prohibitively expensive. India, importing nearly 60% of its LPG needs and historically routing 90% through the Strait of Hormuz, faced severe supply risks, leading to concerns over domestic LPG availability and calls for rationing. Beyond Algeria, India is also eyeing the United States for up to 25% of its 2027 LPG imports and committing $8.8 billion to deep-sea oil exploration to boost domestic output. Looking ahead, this Algerian deal is a cornerstone of India's broader strategy to build a more resilient energy supply chain. The nation's state-owned fuel retailers, including IOC, Bharat Petroleum Corporation Limited (BPCL), and Hindustan Petroleum Corporation Limited (HPCL), are collaborating on a joint tender for US LPG imports, further solidifying the push for diversified sources. India is also evaluating a 30-day strategic LPG stockpile and expanding storage capacity to buffer against future shocks. These proactive measures highlight India's determination to safeguard its energy security and ensure stable access to crucial fuels like LPG, which is vital for millions of households.