US LNG surge to India amid Hormuz disruptions, SPR near 40-year low

The United States has become India's largest supplier of liquefied natural gas and liquefied petroleum gas in May, capitalizing on disruptions in the Strait of Hormuz caused by the ongoing conflict with Iran that began with strikes on February 28. Data from energy intelligence firm Kpler shows Washington exported 900,000 tonnes of LNG to India that month, representing more than 40 percent of the country's total needs and a threefold increase from April. At the same time, the US delivered 630,000 tonnes of LPG, outpacing the combined 380,000 tonnes from all Gulf countries by roughly 60 percent.

India typically routes 60 percent of its LNG and nearly all of its LPG through the critical waterway, but traffic has been hampered since the start of hostilities involving US and Israeli forces. Analysts note that high freight costs had previously limited American market share in India, but the conflict has accelerated a shift toward US supplies. Energy trade between the two countries was already expanding before the war, with American shale resources and export terminals now positioned to fill the gap as India seeks to diversify away from Gulf sources.

The same conflict has forced the US to draw down its own Strategic Petroleum Reserve at a rapid pace. Since March, the Trump administration has released 66 million barrels to maintain export flows and shield domestic consumers from sharper price spikes. The reserve stood at 349.2 million barrels on June 5, its lowest level in three years, and continues to fall by nearly 9 million barrels per week. If current trends hold, stocks will soon drop below the 346.7 million barrel mark recorded in July 2023, reaching depths not seen since the Reagan administration in 1983.

National average gasoline prices stood at $4.15 per gallon on Wednesday, down slightly from the prior week but well above the $3.12 level from a year earlier. Industry observers warn that prolonged closure of the Strait of Hormuz risks triggering panic buying and further surges at the pump as early as next month. The administration's ability to respond to additional shocks has narrowed with each withdrawal from the reserve.

The dual developments underscore how the war has reshaped global energy flows. While US exporters gain ground in markets like India, domestic stockpiles that exist precisely to buffer against supply crises are being depleted to sustain those same exports. The pattern leaves fewer options for managing future volatility in an already strained market.