Innocent merchant ships being sunk = US allies such as South Korea and Japan being attacked by India, a non-US ally. Will US honor its treaty obligations? That is the worst case scenario for the US: it either does nothing and fails its treaty obligations to India, a much weaker country, or it honors its treaty obligations and prevents the Indian military from sinking merchant ships.
In a war economy, the oil that is available will be diverted towards warfare. War economies take place during total war. India blockading China will be a total war because there is no way for China to stop India from blockading the straits without destroying the Indian military. Since China has 5x higher GDP, a larger advantage than that the US enjoyed over Nazi Germany and Imperial Japan, India is likely to be defeated in a total war the same way the Axis were.
India is prepared to suffer the consequences, but it will be of little use in the long run, as India is totally isolated from oil imports without seaports and can't reach any Chinese population centers, while China has forces right next to Delhi.