Our Asia Energy Analyst Mayank Maheshwari discusses how the
conflict in the Middle East is sending ripple
effects through Asia’s energy, power and food systems.
Read more insights from Morgan Stanley.
----- Transcript -----
Welcome to Thoughts on the Market. I’m Mayank Maheshwari, Morgan
Stanley’s research analyst covering energy markets in India
and Southeast Asia.
Today—how disruptions linked to Iran and the Strait of Hormuz are
creating energy-related disruptions across Asia.
It’s Monday, March 23rd, at 8am in Singapore.
To understand the scale of the impact, let’s start with a simple
fact: about a quarter of Asia’s energy—that is oil, liquefied
natural gas, and propane—comes from the Middle East, much of it
flowing through a single chokepoint, the Strait of Hormuz. Any
disruption here affects more than just oil prices. It also hits
power generation, industrial output and even food supply chains
across the region.
Asia hasn’t seen a true energy access shock in over 50 years. So
that makes this moment very critical. And with oil around
$100 per barrel, stress is building in the system. Diesel margins
are double pre-conflict levels. Jet fuel premiums have nearly
doubled. And Dubai crude—normally cheaper than Brent
historically—is now trading at a premium of more than $20 per
barrel. This kind of price move signals tightening supply chains.
Asia’s dependence on [the] Middle East runs deep. Refiners source
up to 80 percent of crude from the region, and 30–40 percent of
LNG imports originate there. For major economies like India and
China, roughly 40–50 percent of oil demand passes through Hormuz.
It’s a critical energy highway. And when flows slow, the
entire system backs up.
Inventories may look like a buffer. Asia holds around 65–70 days
of crude. But the system reacts sooner than waiting to run
out. Governments are already rationing energy, industries are
cutting LNG and LPG usage, and export restrictions are limiting
downstream production of fuels. The tightening has already begun.
The real pressure point may not be oil, but natural
gas—particularly LNG, as Qatar, which is a big supplier of Asia's
LNG, has seen infrastructure damage. Asia accounts for about half
of global LNG consumption, with up to 40 percent secured from the
Middle East. Unlike oil, LNG has very limited buffers; in number
of days, and not in months.
This is where the story extends well beyond energy. Around 25
million tons per year of petrochemical capacity has been
impacted, along with roughly 10 million tons of fertilizer
production. Prices for key materials like polymers have risen
15–25 percent in just a few weeks, and the premiums are still
rising. These inputs feed into everyday products—from cars and
electronics to packaging and agriculture. Even basic services are
affected, with cooking gas shortages hitting restaurants in parts
of Asia.
Policymakers are responding, but options are limited. Around 100
million barrels of crude has been released from reserves.
Countries are securing higher-cost LNG cargoes. And many are
turning back to coal for reliability despite environmental
trade-offs.
Ultimately, the longer this disruption persists, the more
pressure builds across energy, power, chemicals, and food
systems. And in a region as interconnected and import-dependent
as Asia, those ripple effects spread quickly—and widely.
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