Asia’s energy-reliant economies face ‘existential threat’ from prolonged Iran war

Asian economies reliant on energy imports are bracing themselves not just for a spike in oil prices but for the possibility that the Iran war could trigger a prolonged period of energy market disruption.While markets have already priced in the initial disruption to shipping and energy infrastructure linked to the conflict, economists warn that a war lasting several weeks could leave Asian importers facing persistently higher fuel costs, widening trade deficits and slower economic growth.According to a report by ratings agency Fitch, Pakistan and India are among emerging markets most exposed to sustained disruption to traffic through the Strait of Hormuz near Iran, through which about a fifth of global oil supplies normally flow.“For most major emerging markets, higher oil and gas prices would result in a deterioration in the terms of trade,” Fitch said. “That is most notable in Morocco, Pakistan and Thailand, where energy deficits exceed 4 per cent of GDP.”China, the Philippines and Indonesia were also affected by the conflict, the report added.Asia’s vulnerability has also increased as spot prices for natural gas have more than doubled to three-year highs, reaching over US$25 per MMBtu after Qatar Energy declared force majeure following drone attacks on its Ras Laffran plant.A security guard stands outside a closed school after a government fuel-saving order led classes to shift online amid soaring oil costs in Rawalpindi, Pakistan, on Tuesday. Photo: AFP