As the military confrontation involving Iran, Israel, and the US enters its 14th consecutive day, the ripple effects of the hostilities continued to manifest across India’s critical infrastructure.

Domestic production of Liquefied Petroleum Gas (LPG) rose by 30% on Friday as the Indian government moved to stabilise fuel availability and quell public anxiety. With the conflict involving Iran, Israel, and the US entering its third week, the Ministry of Petroleum and Natural Gas has directed all refineries to maximise output, pushing utilisation rates beyond 100% capacity to ensure the nation’s "highest priority" consumers remain insulated.

Shortage or No Shortage?

Reports of disruption to LPG imports amid the West Asia conflict have triggered panic buying in parts of India. The Core reported that while the government maintains that there is no shortage of cooking gas, long queues for LPG cylinders have been reported in several cities.

At a media briefing on Thursday, Sujata Sharma, Joint Secretary at the Ministry of Petroleum and Natural Gas, said India’s refining and supply infrastructure is operating at full capacity and that domestic availability of LPG remains adequate.

Despite these assurances, demand has surged in some urban centres, including Delhi, with reports of LPG booking lines becoming difficult to access as orders spike.

The government has prioritised Piped Natural Gas (PNG) for households and CNG for transport under the Natural Gas (Supply Regulation) Order, 2026, classifying them as the highest-priority sectors for gas allocation. Commercial users facing LPG supply issues have been encouraged to shift to the City Gas Distribution (CGD) network.

The supply strain is also visible in the liquefied natural gas (LNG) market. Qatar, which accounts for nearly 45% of India’s LNG imports, has declared force majeure on several deliveries following disruptions at its Ras Laffan facility.

The tightening supply could affect the CGD industry, which depends on imports for around 40% of its gas requirements. According to CRISIL Ratings, reduced LNG availability could lead to an 8–10% decline in daily sales volumes for the sector.

The impact is expected to fall mainly on industrial and commercial consumers, who rely heavily on imported LNG. Household PNG and CNG segments — accounting for about 70% of total volumes — are likely to remain largely insulated due to priority allocation.

City gas distributors have also sought to reassure consumers. Mahanagar Gas Ltd (MGL) said domestic PNG supply for household cooking and CNG for transport vehicles will continue uninterrupted across its operational areas.

Similarly, Indraprastha Gas Ltd (IGL) has said households will continue to receive a stable and uninterrupted gas supply.

Industrial Impact: Jindal Stainless Curbs Production

While households are being prioritised, the Indian industry is beginning to feel the "rationalisation" of fuel. Jindal Stainless announced on Friday that its plants are operating at a reduced capacity due to severe fuel shortages.

"Due to the heavy dependence of stainless steel manufacturing on industrial gases such as propane, LPG and natural gas, several processes across our plants have been adversely impacted," the company stated in an exchange filing.

The disruption stems from the closure of the Strait of Hormuz, which has halted traditional traffic and compelled India to scramble for alternatives, including increased Russian imports. As authorities divert gas supplies from the industrial sector to prioritise household consumption, Jindal Stainless confirmed its plants are now operating at a "rationalised capacity."

Fiscal Fortification: The Economic Stabilisation Fund

Amid the supply crunch, Union Finance Minister Nirmala Sitharaman moved to create a fiscal safety net. Addressing the Lok Sabha on Friday, Sitharaman proposed the establishment of an Economic Stabilisation Fund to provide "fiscal headroom" against global headwinds.

The Finance Ministry has sought Rs 57,381.84 crore for this fund as part of a larger Rs 2.81 trillion supplementary demand for grants for FY26. "We are coming up with economic stabilisation measures in anticipation of what cannot be foreseen," Sitharaman said, noting that the fiscal deficit remains on track at 4.4% of GDP despite the energy shock.

Kerosene as a Strategic Buffer

Since the conflict began on February 28, the volatility surrounding the Strait of Hormuz—the primary artery for India’s LPG and LNG imports—has forced the Indian government into a defensive posture to protect domestic consumers from a potential supply shock.

In a move signaling high-level concern over maritime logistics, officials have allocated approximately 40,000 kilolitres of additional kerosene to states with high dependencies on the Public Distribution System (PDS). This contingency step is designed to provide a temporary substitute for cooking fuel in rural areas should the distribution of LPG face prolonged delays due to rising freight risks or shipping diversions in the Gulf.

Authorities have coupled this allocation with a public appeal to avoid panic buying, highlighting that current domestic LPG stocks remain adequate for the immediate term.

Aviation Corridors and Transit Restrictions

Beyond energy, the conflict has severely constrained the aviation map of West Asia. Fourteen days into the hostilities, air travel through the United Arab Emirates remains heavily restricted.

While major hubs like Dubai International and Al Maktoum International have attempted to restore some level of service, they are operating well below full capacity due to persistent airspace closures.

Carriers including Emirates, Etihad, and Indian airlines continue to operate on revised, fluid schedules. Currently, passengers are only being accepted for transit through these hubs if their connecting flights are strictly confirmed, as airlines struggle to manage the backlog of displaced travelers and shifting security protocols.

The conflict intensified significantly on Friday as the Israeli military confirmed strikes on over 200 targets in Tehran and Karaj, focusing on missile production sites. These strikes coincided with Quds Day rallies, where Iran’s new Supreme Leader, Mojtaba Khamenei, vowed to keep the Strait of Hormuz closed—a move that threatens the primary artery for 20% of global oil and half of India’s energy imports.

The security situation in the region grew more complex following the crash of a US KC-135 Stratotanker in western Iraq on Friday, resulting in four fatalities. While Iran-backed factions claimed credit, US officials have characterised the incident as an accident in friendly airspace.

To counter the resulting market volatility, US President Donald Trump has issued a 30-day waiver for sanctioned Russian oil currently at sea, a strategic move intended to cool global energy prices as Brent crude hovers near $101 per barrel.

Supply Watch and Long-term Risks

For now, India’s strategy relies on a combination of domestic prioritisation and strategic reserves to cushion the economy from short-term volatility. However, as the conflict moves into its third week, the sustainability of this "cushion" remains tied to the security of Gulf shipping lanes.

A prolonged disruption to the region’s energy infrastructure could transform these temporary pressures into a structural challenge for India’s fuel, gas, and aviation sectors in the months ahead.