LNG Rebounds, LPG Remains Under Pressure Amid Strait of Hormuz Disruption

India's ability to replace lost supplies of liquefied natural gas (LNG) and liquefied petroleum gas (LPG) has been starkly different since the disruption in the Strait of Hormuz due to the US-Iran conflict. LNG imports have largely recovered as Indian buyers turned to the global spot market, where they found replacement cargoes at a higher cost.

According to Kotak Institutional Equities, India was able to find LNG elsewhere and make up for the initial supply shock. In contrast, LPG imports fell sharply despite a rise in domestic production, with imports falling 48% year on year during April-July 2026.

The reason for this difference lies in the global market. The LPG market is less deep than the LNG market, making it harder for India to quickly replace lost West Asian cargoes. This has made LPG more expensive, with Saudi Aramco's Contract Price increasing 46% between February and June.

The government has taken steps to compensate by producing more LPG at home, but this hasn't been enough to make up for the drop in imports. Part of the decline appears to reflect consumers switching to alternatives such as kerosene, electricity, coal, and firewood as LPG supplies tightened.