Asian economies are faced with a major energy risk after Iran closed the Strait of Hormuz and warned it would fire on any ship attempting to pass. This follows US President Donald Trump's decision to team with Israel and launch open-ended attacks against Iran, with the stated goal of toppling the country's long-ruling Islamist government.
Counter-strikes are now underway, and Trump has said the conflict could continue for weeks.
The closure of the Strait of Hormuz, one of the world's most critical oil corridors, threatens to disrupt roughly a fifth of global oil supplies and push crude prices sharply higher.
After Saturday's strikes on Iran, oil markets reacted immediately. Prices jumped from around $70 to nearly $80 a barrel over the weekend before easing slightly. Shipping activity through the Strait of Hormuz began slowing as tankers rerouted and insurance costs climbed.
Higher oil prices, trade disruption and investment uncertainty threaten what had been an improving growth outlook for 2026.
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Oil Lifeline Under Threat
For Asia, the risks are direct. Several major Asian economies, including China, Japan, South Korea, Taiwan and India, rely heavily on oil from the Middle East. Roughly one-fifth of the world's oil passes through the Strait of Hormuz, much of it bound for Asia.
While most countries have emergency reserves that can last weeks or even months, a prolonged war or a blockade of the strait would pose a serious threat, analysts told The NYT.
India's Energy Dilemma
India recently shifted its oil sourcing strategy as part of a trade deal with the US. The agreement involved reducing reliance on Russian oil and increasing imports from other regions, mainly the Persian Gulf.
China
Oil from Asia is vital for China's energy security. The country imports more than half of its seaborne crude from the region, and roughly a quarter of that comes from Iran.
“China does not have the capacity to cushion the shock,” said Muyu Xu, a senior crude oil analyst at Kpler in Singapore told The NYT. “It would be catastrophic not just for China, but for the global market.”
China currently has enough crude oil reserves to last about 115 days. It also operates pipelines from Russia and Kazakhstan, which are insulated from Middle East disruptions.
Beijing is already grappling with a slowing economy, a prolonged property crisis, deflationary pressures and high youth unemployment.
Japan And South Korea
Japan and South Korea are even more vulnerable due to their dependence on The Gulf's energy and limited domestic production.
Japan imports more than 90 per cent of its oil through the Strait of Hormuz. South Korea sources about 70 per cent of its crude from the region.
Both countries have substantial reserves. Japan holds about 254 days of oil stockpiles, while South Korea has reserves covering more than 210 days of consumption.
Even if supplies continue, higher prices could hurt. Japan and South Korea already spend over $100 billion annually on energy imports. Rising costs would worsen trade balances and strain households.
Japan is also battling persistent inflation.
Taiwan's Semiconductor Risk
Taiwan's dependence on imported energy presents another global concern.
The island imports more than 96 per cent of its energy, with much of its oil and gas arriving via the Strait of Hormuz. It has around 120 days of oil reserves but only about 11 days of natural gas supply.
Any prolonged disruption could affect semiconductor production. Taiwan's factories produce most of the world's advanced chips, used in smartphones, electric vehicles and artificial intelligence systems. These facilities rely on stable electricity supplies.
Backup generators can manage short-term outages, but they are not designed for extended crises.
The energy shock comes at a sensitive time for the United States. A recent Conference Board survey showed CEO confidence rising, though nearly 60 per cent warned that geopolitical tensions posed a significant risk. The World Bank recently described the US economic outlook as “buoyant.”
