War with Iran chokes flows of oil and natural gas, highlighting energy security risks for Asia

Core Insights - Global energy trade is facing significant disruptions due to the ongoing conflict in the Persian Gulf, leading to soaring oil and natural gas prices [1][5] - Asia is particularly vulnerable as it heavily relies on imported fuel, with a significant portion transported through the Strait of Hormuz [1][2] Energy Trade Dynamics - Approximately 13 million barrels of oil per day passed through the Strait of Hormuz in 2025, accounting for about one-third of all seaborne crude [2] - The strait also facilitates roughly a fifth of the world's liquefied natural gas (LNG) shipments, with over 80% of LNG exports in 2024 directed to Asia [2] Price Movements - Since the onset of the Iran war, Brent crude prices have surged by 15%, reaching around $84 per barrel, the highest since July 2024 [3] Geopolitical Responses - The U.S. government is considering offering risk insurance to shippers and may deploy naval forces to protect vessels in the region [4] - Historical precedents indicate that supply disruptions can lead to wealthier nations outbidding poorer ones for limited fuel supplies, exacerbating vulnerabilities in less affluent economies [4] Economic Implications - The closure of the Hormuz Strait could not only elevate oil and gas prices but also significantly hinder global economic activity [5] Risks for Major Asian Economies - China and India, as the largest and third-largest crude oil importers respectively, face substantial risks from sustained oil price increases, which could impact their transport, industry, and households [6] China's Energy Strategy - China, the largest buyer of Iranian oil, has prioritized energy security and has alternative energy sources, including renewables [7] - In 2022, China imported about 1.4 million barrels per day from Iran, representing roughly 13% of its total seaborne crude imports [7] - China's independent refiners have been key buyers of discounted oil from Iran, Russia, and Venezuela, despite ongoing geopolitical tensions [8]