Donald Trump has rushed in recent days to assure the world that the economic impact of his war against Iran can be contained.
Sure, one of the most important waterways for global trade has been closed for almost two weeks, but it could reopen before long. Meanwhile, US oil-related sanctions imposed on “some countries” will be lifted. And besides, the whole conflict could end soon.
Such vague statements, and the release of hundreds of millions of barrels of emergency crude oil from government reserves, It calmed the markets, at least for a while. Oil prices, which hit four-year highs on Monday, fell below $100 per barrel, before rising again.
But the war continues. Several merchant ships have been attacked in and around the Strait of Hormuz. Iran’s Revolutionary Guard has declared that it will not allow “not one liter of oil” to be exported from the Middle East if US and Israeli attacks continue.
Across Asia, the world’s largest crude oil importing region, the rhetoric surrounding the ramifications of this conflict is less important than the reality. By 2025, the continent will depend on the Middle East for 59% of its crude oil imports, according to Kpler.
You can’t respond to the Middle East right now. The Strait of Hormuz, through which around a fifth of the world’s oil supplies and gas tankers normally pass, remains largely closed to trade. Some producers in the region, struggling to ship their oil to the world, are reducing production.
“The situation is certainly very worrying,” said Yousef Alshammari, president of the London College of Energy Economics. Even when ship operators again feel confident sending tankers through the strait, oil producers “will need time to bring supplies back to pre-crisis levels,” he added.
“The longer the strait remains closed, the more likely it is that these reserves will be depleted and prices will continue to rise, causing a major global economic crisis,” Alshammari said. “The only solution to this is to reopen the strait and allow navigation to resume.”
Asian countries from Pakistan to South Korea have been forced to confront a brewing energy supply crisis.
China, which has the world’s largest onshore crude reserves, is said to have received millions of barrels of oil from Iran since the war broke out. India has reportedly increased its imports of Russian crude oil after the United States issued a waiver from sanctions, although hot foods and drinks are reportedly disappearing from menus across the country amid fears of a shortage of cooking fuel. Japan, with a reserve of 350 million barrels, is releasing about 80 million (equivalent to 45 days of supply) as part of the largest release ever by the International Energy Agency.
But the relative comfort within the continent’s dominant economies is not shared by many of its peers.
South Korea
South Korea is “highly dependent on global trade and energy imports from the Middle East,” its president, Lee Jae Myung, said Monday as he announced his first cap on domestic fuel prices in nearly three decades.
Thailand
Thailand’s fuel fund is spending tens of millions of dollars every day to keep fuel prices artificially low, subsidizing consumers. Trade Minister Suphajee Suthumpun urged the public not to panic, according to the Bangkok Post, telling reporters that the government had prepared scenarios “to deal with any potential impacts.”
Bangladesh
Bangladesh began rationing fuel sales last week in an effort to stop panic buying and closed all universities in a bid to maintain the country’s supplies. The situation has become so serious that the country – which imports the vast majority of its fuel – has deployed the army to major oil depots and police around service stations.
Burma
Myanmar’s junta introduced rationing and banned half of private vehicles from the roads, allowing those with even number plates to drive on even dates and with odd number plates on odd dates.
Pakistan
Pakistan is implementing austerity measures, including closing schools and allowing government offices to operate only four days a week. “To stabilize the economy we have taken difficult decisions,” Prime Minister Shehbaz Sharif said on Monday.
Tanker truck drivers complained about shortages earlier this week. “Iran has closed the border for its part,” a driver, Abdul Shakoor, told AFP. “The tank is empty.”
Philippines
Some public officials in the Philippines have adopted a four-day week as part of the country’s efforts to curb fuel consumption. Government agencies, state universities and colleges have also been asked to reduce fuel consumption by at least 10%, including by setting air conditioning units to no less than 24 degrees.
Vietnam
Vietnam has asked companies to “encourage working from home where possible” to reduce the need to travel, in a broad remote working campaign reminiscent of the early days of the Covid-19 pandemic. Tariffs on foreign fuel are also set to be lifted until the end of April, as part of a bid by his government to help shore up energy supplies, amid long queues at gas stations and rapidly rising prices.
Trump has promised light at the end of the tunnel for those trying to navigate this energy crisis. But Asian governments, businesses and consumers remain in the dark, with no idea of the length of the tunnel.
Economic disruption is often contagious. The health of Asian economies, from whether companies have enough financial comfort to import from abroad to whether citizens can afford vacations, is felt far beyond their borders.
