SINGAPORE: In an interview with Reuters on Monday (March 23), Foreign Affairs Minister Vivian Balakrishnan underlined how deeply the war in the Middle East, which began on Feb 28 when the US and Israel started bombing Iran, affects Asia.
The conflict has all but closed down the Strait of Hormuz, a chokepoint for around 20% of the global supply of oil and liquefied natural gas (LNG). and because Asian economies are heavily reliant on the Middle East for oil, Dr Balakrishnan told Reuters, “Right now, the closure of the Strait of Hormuz is, in a sense, an Asian crisis.”
Even more worryingly, the minister added that the “entire global economy has been taken hostage,” given the scale of the financial crisis that may ensue due to the conflict.
Shortly after it began, the war’s reach widened across the region due to Iran’s retaliatory actions and has affected targets in Bahrain, Jordan, Kuwait, Qatar, Saudi Arabia, Turkey, and the United Arab Emirates. Infrastructure in Azerbaijan, Kurdistan, and Oman has been damaged by Iranian strikes as well. The conflict in Lebanon has also escalated, displacing over 1 million people.
Impact on Asia
Before Feb 28, the Strait of Hormuz had 20 million barrels of crude oil from Iran, Iraq, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates transiting through it every day, which meant an annual energy trade of almost US$500 billion (S$639 billion), making it crucial to the global economy.
In 2024, 84% of the crude oil shipments passing through the strait were headed toward markets in Asia, according to an estimate from the United States’ Energy Information Administration (EIA). As for liquefied natural gas (LNG), 83% of the volume passing through the Strait of Hormuz was similarly bound for Asia.
The countries that would likely be affected the most by the strait’s closure are China, India, Japan, and South Korea. According to a report from Al Jazeera, 69% of crude and condensate flowing through the strait in 2025 were bound for these countries, whose power grids, transport networks, and factories depend on a supply of energy from the Gulf.
Dr Balakrishnan told Reuters that if the United States and Iran follow through on their threats to each other’s destroy energy infrastructure, this would result in a longer period of diminished energy exports and higher fuel prices, as well as inflation, although it’s too early to tell if it will be on the same scale as the Asian financial crisis of 1997 to 1998 that affected the whole world.
He also underlined that Asian countries should hasten the move toward renewable energy sources, but keep government finances in check to prevent a run on economies or currencies. /TISG
Read also: About 90 ships cross the Strait of Hormuz as Iran exports millions of barrels of oil despite the war
