Asia faces long-term energy shock from US-Iran conflict
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The war between the United States and Iran threatens to inflict a years-long energy shock on Asian oil importers, energy analyst Vandana Hari of Vanda Insight warned. Asia's heavy dependence on Middle Eastern crude, combined with the closure of the Strait of Hormuz and threats to the Bab el-Mandeb Strait, has left importers vulnerable. Oil prices have risen, with India's import bill surging over 60% in the three months to June.
Import Dependency
Asia imports most of its oil from the Middle East due to geographical proximity, making purchases more economical than from the United States. This dependency has become a vulnerability amid the US-Iran war, with the Strait of Hormuz shut down and the Bab el-Mandeb Strait threatened. The Houthis announced a blockade of the waterway, prompting two Saudi tankers and three others to turn around from the Bab el-Mandeb and head for the Suez Canal, according to ZeroHedge and Reuters.
Price Impact
Oil prices have risen further as the US continued bombing Iran for the 11th time, suggesting mediation efforts are unlikely to have an immediate effect. For India, the added cost caused the oil import bill to balloon by over 60% for the three months to June. Longer journeys via the Suez Canal mean more expensive oil, compounding the financial strain on Asian economies.
What's Next
The UN Security Council is set to discuss the conflict next week, but no resolution is expected. It remains unclear whether alternative supply routes or strategic reserves can mitigate the long-term impact on Asian importers.
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Asia faces long-term energy shock from US-Iran conflict
