India's restaurants are under threat from the LPG supply crunch caused by the Iran war

The Iran war is causing global disruption, and restaurants in India are under threat because of it.

The conflict is threatening India's supply of liquefied petroleum gas (LPG), most of which is imported and the global supply of which is threatened by disruptions in the Strait of Hormuz.

On Tuesday, India's Ministry of Petroleum and Natural Gas said that it was directing oil refineries to prioritize supplying LPG to the 330 million households that use it as a primary cooking fuel, over 3 million businesses that use commercial LPG cylinders.

This is causing a "crisis situation" that will lead to the closure of many restaurants over the next few days, Sagar Daryani, president of the National Restaurant Association of India, told CNBC.

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

The industry was already facing low demand and high costs, but if the LPG supply issues persist, it would lead to "closure of business and job losses," Daryani said.

The NRAI represents over 500,000 restaurants across India. India's industry generates an annual turnover of over 5.7 trillion rupees ($78.9 billion) and employs over 8 million people, per the NRAI.

On Tuesday, India's Ministry of Petroleum and Natural Gas said in an X post that it was directing oil refineries to prioritize LPG supply to households and use imported liquefied natural gas (LNG) for essential commercial sectors such as hospitals and educational institutions.

Announcing the shifts in LPG supply, India's Ministry of Petroleum and Natural Gas said it would form a committee to review representations for LPG supply to restaurants, hotels and other commercial industries.

The NRAI is urging the government to classify the restaurant industry as an essential service, Daryani said.

India is the world's second-largest importer of LPG and consumed 31.3 million metric tons of it in the financial year 2025, according to a S&P Global report on Tuesday. The country can only meet 41% of this demand from its domestic LPG supply, it said.

"India imports roughly 67% of its LPG requirements, with about 90% of these imports transiting through the Strait of Hormuz," said Manish Sejwal, senior vice president of commodity markets, oil-NGLs/LPG & Naphtha at Rystad Energy, told CNBC by email.

Mumbai-based AHAR, another lobby group of hotels and restaurants, has raised the issue of shortage of LPG supplies with the local authorities and has warned that many of its members are on the "verge of closure."

Nearly 10,000 establishments will shut down by Wednesday across India's southernmost state, Tamil Nadu, M. Ravi, president of Chennai Hotel Association, told CNBC. 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 direct supplies to domestic consumers, but did not explicitly halt supplies to hotels and restaurants.

Chandra Prakash, the president of All India LPG Distributors Federation, told CNBC that LPG distributors have now been asked to not only concentrate on supplies to households but halt supply to restaurants and hotels.

Restaurants will have to find alternate sources of fuel like wood or kerosene or shift to electric stoves, said Prakash, whose organization represents nearly 25,000 LPG distributors in the country.

LPG supply is a politically sensitive issue in India and is closely linked to Prime Minister Narendra Modi's flagship social welfare scheme that offers subsidized LPG to poorer 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 Puducherry — are due to go to the polls in the first half of 2026.