Clarity in Credit

Middle East Conflict and the Uneven Effects on Energy in Asia

Episode Summary

In the latest episode of our Clarity in Credit podcast series, Eric Chan, Vice President of Global Non-Bank Financial Institutions, and Marcos Alvarez, Managing Director of Global Financial Institution Ratings, discuss the impact of the conflict in the Middle East on Asian sovereigns with Rohini Malkani, Senior Vice President of Global Sovereign Ratings.

Episode Notes

The escalation in the Middle East has exposed Asia's dependence on imported hydrocarbons, delivering price shocks and significant physical supply disruptions. Our analysts explore the effects currently playing out across the different regions in Asia, the implementation of varying contingency measures, and the immediate and longer-term implications of a protracted conflict.

KEY HIGHLIGHTS

With approximately one-fifth of global crude oil and liquified natural gas supply currently constrained at the Strait of Hormuz, and an estimated 83% of that destined for Asian buyers, Asia is not simply a price-taker at this point, but also the region most directly exposed to physical supply disruptions.
Exposure is nonetheless not uniform across the region. For example, North Asia has strong crude reserve buffers, while parts of South and Southeast Asia remain more exposed given limited buffers and fiscal space to absorb sustained energy subsidies and/or higher import costs.
Contingency measures have varied across countries in managing supply shortfalls and higher import costs. Nevertheless, the current price and supply shock are weighing on growth, raising inflation risks, and complicating monetary-fiscal trade-offs.
Beyond the direct energy shock, higher inputs such as freight, fertilizer, industrial gases, and petrochemicals are also raising production risks across industries and creating broader supply-chain bottlenecks.

RELATED RESEARCH

Asia: Middle East Conflict Deepens Energy and Logistics Shock With Uneven Spillovers (March 30, 2026), https://dbrs.morningstar.com/research/477798
Middle East Conflict Delivers an Energy and Maritime Logistics Shock to Asia (March 4, 2026), https://dbrs.morningstar.com/research/475676

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