LPG supplies are threatened by the Iran war. Indian restaurants are in trouble

The Iran war is causing global turmoil and Indian restaurants are under threat because of it.

The conflict threatens India’s supply of liquefied petroleum gas (LPG), much of which is imported, and the disruption in the Strait of Hormuz threatens global supplies.

India’s Ministry of Petroleum and Natural Gas said on Tuesday that it has directed refineries to prioritize the supply of LPG to the 330 million households that use LPG as their primary cooking fuel and the more than 3 million businesses that use commercial LPG cylinders.

This has created a “crisis situation” and will likely result in many restaurants closing in the coming days, Sagar Daryani, president of the National Restaurant Association of India, told CNBC.

He added that 90% of restaurants in India depend on LPG cylinders to run their kitchens.

Daryani said the industry was already facing lower demand and higher costs, but continued LPG supply issues would lead to “business closures and job losses.”

NRAI represents over 500,000 restaurants across India. According to NRAI, Indian industry generates annual sales of more than 5.7 trillion rupees ($78.9 billion) and employs more than 8 million people.

India’s Ministry of Petroleum and Natural Gas told XPost on Tuesday that it has directed refineries to prioritize LPG supply to households and use imported liquefied natural gas (LNG) for essential commercial sectors such as hospitals and educational institutions.

India’s Ministry of Petroleum and Natural Gas has announced changes in LPG supply and has set up a committee to review language regarding LPG supply to restaurants, hotels and other commercial industries.

Daryani said NRAI is calling on the government to classify the restaurant industry as an essential service.

India is the world’s second-largest LPG importer, consuming 31.3 million tonnes in fiscal 2025, according to an S&P Global report on Tuesday. Domestic LPG supplies can only meet 41% of this demand.

“India imports about 67% of its LPG requirements, and about 90% of its imports go through the Strait of Hormuz,” Manish Sehwal, Rystad Energy’s senior vice president of commodity markets, oil NGLs/LPG and naphtha, told CNBC in an email.

AHAR, another Mumbai-based hotel and restaurant lobby group, has raised the issue of LPG shortages with local authorities, warning that many of its members are “on the verge of closure”.

M. Ravi, president of the Chennai Hotels Association, told CNBC that nearly 10,000 properties will be closed by Wednesday across India’s southernmost state of Tamil Nadu. He added that this would include the majority of small and medium-sized restaurants there.

Restaurants and hotels were already facing LPG supply constraints after the government on Thursday asked domestic oil marketing companies to supply directly to domestic consumers but did not explicitly stop supplies to hotels and restaurants.

Chandra Prakash, president of the All India LPG Dealers Federation, told CNBC that LPG dealers are now being asked to not only focus on supplying households but also stop supplying to restaurants and hotels.

Prakash, whose association represents about 25,000 LPG distributors in the country, said restaurants will need to find alternative fuel sources such as wood or kerosene or switch to electric stoves.

LPG supply is a politically sensitive issue in India, closely linked to Prime Minister Narendra Modi’s flagship social welfare scheme that provides subsidized LPG to poor households. As of November, the government had provided 103 million subsidized gas connections under the scheme.

The price of cooking gas is a hotly debated issue during elections. Five Indian states (Assam, Tamil Nadu, Kerala, West Bengal and Pondicherry) are scheduled to vote in the first half of 2026.