In the latest broadcast of the Big Take Asia podcast on March 6, economic experts from Bloomberg said that instability in the Middle East is paralyzing vital maritime routes.
With the Hoarmuz Strait threatened to close, the world's most energy-hungry countries in Asia such as China, Japan and India are facing the risk of serious supply disruptions. Rising crude oil prices not only put pressure on inflation but also directly threaten the economic recovery of the entire region.
Commenting on this crisis, Dr. Fereidun Fesharaki - Honorary President of Facts Global Energy (FGE), one of the world's leading energy economists - said that the markets are in an extremely alarming state. Mr. Fesharaki warned that Asian economies are currently the most vulnerable parties if the conflict continues to escalate.
According to Mr. Fesharaki and Bloomberg expert Daniel Ten Kate, there is a worrying reality: While the US has become more energy-independent thanks to shale oil, Asian powers are still dependent on more than 70% of oil imports from the Gulf region. If the crisis leads to a full-scale and prolonged war, transportation costs and ship insurance premiums will skyrocket and push gasoline prices in these countries to unpaid levels.
The situation in the Strait of Hormuz is now likened to a "bottleneck" for Asian energy security. When oil flows through here are disrupted, economies with low strategic reserves will be the first to suffer. Especially India and China, two countries that are maintaining growth rates based on cheap fuel sources from the Middle East.
Experts warn that if there are no timely alternatives, a oil price shock could lead to a wave of investment capital outflows and weaken the purchasing power of billions of consumers in this region.
Not only affecting consuming countries, the conflict also changes the energy geopolitical map. Asian countries are frantically seeking alternative supplies from Russia or Central Asian countries to reduce dependence on the Gulf region.
However, infrastructure transformation and signing new contracts cannot happen overnight. This puts Asian governments in a dilemma between maintaining diplomatic relations and ensuring national energy security.
