Asia faces an energy shock from the Iran war and a closed Strait of Hormuz, as governments halt exports and draw down stockpiles

Asia’s biggest economies are bracing for fuel shortages and higher prices after Iran shut the Strait of Hormuz, a key artery for oil and gas shipments from the Middle East. 

“Asian countries are particularly reliant on oil and gas from the Gulf region,” Sung Jinseok, a researcher at the National University of Singapore’s Energy Studies Institute, told Fortune. The region is the world’s fastest‑growing importer of oil, while production remains low due to depleting fields and limited new discoveries.

Around 19 million barrels of oil, or 20% of the global oil trade, passes through the Strait of Hormuz each day. On average, exports from the Gulf constitute 80% to 90% of oil brought into Japan, and 30% to 40% of oil imported into China.

Asian governments are quickly moving to manage their fuel stockpiles. Thailand suspended its crude and petroleum exports on March 1; China ordered its largest oil refineries to halt diesel and petrol exports on March 5. Asian energy firms are curbing exports as well: Mangalore Refinery and Petrochemicals also curbed fuel exports yesterday.

Japan and South Korea, both major customers of Middle Eastern gas and oil, have also stressed that they have enough fuel stockpiled to handle demand, at least in the short term.

According to Sung, although countries like China have diversified their energy supply to include imports from Russia and Central Asia, and have significant domestic oil and gas production, “the level of dependency on exports from the Gulf remains high”.

The Strait of Hormuz, which sits at the entrance to the Persian Gulf, is also a key artery for liquified natural gas (LNG), with one fifth of global LNG volumes passing through its waters,........

© Fortune