Four of Asia’s biggest economies could suffer the most severe impacts from the latest war in Iran. That’s because they are most reliant on the energy imports that pass through the Strait of Hormuz.
About 75-80% of all oil and 59% of the LNG that passes through the Strait are destined to Japan, South Korea, India and China.
Japan, which gets 87% of its fossil fuel imports, and South Korea, which receives 81% from the Gulf, are the most exposed, according to Zero Carbon Analytics. India and China, which gets half its oil from Iran, will also feel major impacts, particularly if the Strait is blocked.
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Prices of oil have already shot up by 10% with Brent crude in the high $70s and JPMorgan is saying oil could hit $120 per barrel is the conflict drags on.
The Strait of Hormuz is the main route for oil exported from Saudi Arabia, Iraq and Iran. It’s narrow, and also the only route for LNG from Qatar and the UAE to enter global markets.
Iran partly closed the Strait for several hours in the middle of last month to conduct military exercises, “and the government has reportedly said that closing the Strait would be “easier than drinking a glass of water”.
Dan Alamariu, an analyst who just published a report for Oxford Economics, has said that while the current conflict is larger and more intense than the 12-day war that erupted last year, he believes it is “likely to last one to three weeks, at most two months.”
Shipping, aviation upheaval
Already over 200 oil tankers are reported to be idling or have dropped anchor near the Strait, while 170 container vessels are also said to be stuck there.
And that may well be an optimistic outlook. If Iran wants to prolong the economic impact, oil prices could trigger a wider economic shock, as happened with the war in Ukraine.
The impacts go beyond energy costs. Analysts say that every $10 rise in oil prices could raise inflation by 0.1 to 0.9 percentage points in Asia, hitting Thailand, Vietnam and South Korea.
Major shipping companies such as Maersk are already avoiding the Strait and rerouting around the Cape of Good Hope, which adds 10-15 days to their journeys and adds considerably to fuel and insurance expenses. The extra fuel cost is about $1 million per voyage.
There are also more than 400,000 containers stuck on vessels in the Gulf with components for chips and EV batteries. Exports of nitrogen fertilizer to South Asia have also been disrupted, according to Procurement magazine.
Air freight costs for exports from India have reportedly spiked by 400% over the past two days, MUFG Research has said, while aviation impacts are also quite severe. The closure of airports and airspace in the Gulf has caused thousands of flights to be cancelled, as the Gulf is a major corridor between Asia and Europe.
Currency impacts, inflation risk
Negative impacts are weighing on multiple Asian currencies, such as the Indian rupee, the South Korean won and the Philippine peso, as trade deficits increase.
Asian stock markets declined on Monday, while gold surged toward $5,400 an ounce.
If the inflationary shock continues, it may force the US Federal Reserve and the European Central Bank to pause planned interest rate cuts, or even ponder hikes, a report by Reuters said, while a prolonged closure of the Strait could trigger a global recession.
Iran is reported to be close to economic collapse. The rial has plunged to record lows and was trading above 1 million rial per US dollar in street markets.
The cost of rebuilding infrastructure, such as airports, power grids and oil refineries, has been estimated at tens of billions of dollars, while inflation exceeds 40-50%. There is widespread unemployment, severe food shortages and social unrest.
Aside from these immediate painful impacts, there could be some positive outcomes if the crisis causes countries to electrify their power sources faster.
“Ramping up renewable energy deployment and pursuing electrification are strategic choices for oil and gas-importing countries to reduce their vulnerability,” Zero Carbon Analytics said.
“This is particularly the case for price-sensitive South and Southeast Asian countries. For countries like Pakistan, which experienced an unprecedented solar boom in 2025, renewables such as solar offer a cheaper, more reliable and more immediate solution,” it said.
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