China is weathering the Iran war oil shock better than others in Asia

As the war in Iran rages and the consequences of the shock to commodity markets become clearer, the vulnerability of Asia’s economies tops the list of concerns in the research reports of investment banks.The region’s reliance on energy imports from the Gulf has come under scrutiny. The facts speak for themselves. Three-quarters of the oil supplies that passed through the Strait of Hormuz before Iran effectively closed the waterway were destined for China, India, Japan and South Korea.While China alone accounts for nearly 40 per cent of the crude supplies that normally transit through the strait, India, Thailand and South Korea are more exposed to disruptions in the flows of oil and gas via the waterway.According to Barclays, between 46 and 70 per cent of the crude imports of the three countries come from the Gulf. “There are also specific vulnerabilities [linked] to the Strait of Hormuz that the aggregates may mask [such as the 97 per cent of India’s non-liquefied natural gas imports of petroleum gases],” Barclays said.Some Asian governments have already taken steps to curb energy consumption, while cooking gas and diesel shortages have emerged in India and Thailand. As Societe Generale recently noted, “A key issue now is how long the major importers can keep their fuel systems running before more severe shortfalls emerge.”This is why buffers that soften the blow of the energy shock are important. Nomura notes that Japan and South Korea have the largest strategic and commercial stockpiles of crude, covering 200-250 days of imports. India and Indonesia, on the other hand, are in a much more precarious position, with their reserves covering only 20-25 days of demand.