Stock markets across the Asia-Pacific region suffered their worst weekly performance since the onset of the Covid-19 pandemic, as the oil price crisis triggered by the Iran conflict sent shockwaves through economies that are heavily dependent on Gulf energy imports. With Brent crude surging past $90 a barrel — a more than 25% weekly gain — the economic costs for energy-importing nations across Asia are mounting rapidly.
The Asia-Pacific region is particularly exposed to disruptions in Gulf energy supply. Many of the region’s largest economies, including Japan, South Korea, India, and China, rely heavily on oil and gas imports from the Middle East, meaning that any sustained increase in energy prices hits their economies with particular force. The combination of higher oil prices and disrupted LNG supplies from Qatar has created a perfect storm for Asian energy importers.
The oil price spike has been driven by a combination of factors including direct supply disruption, tanker route insecurity through the Strait of Hormuz, and a rapidly developing storage crisis. Kuwait has already begun cutting production at fields running out of storage capacity, and consultants warn that Saudi Arabia and the UAE face the same problem within 20 days. Qatar’s LNG exports have been disrupted by drone strike damage to a key terminal.
Qatar’s energy minister delivered the most alarming assessment of the week, warning that continued conflict could force all Gulf exporters to halt production and send oil to $150 a barrel. Even a ceasefire would leave Qatar’s LNG exports offline for weeks or months, the minister said, as the terminal damage is repaired. Europe is already competing with Asian buyers for alternative LNG supplies, pushing up prices globally.
The financial damage extends well beyond equity markets. Bond yields across major economies surged as inflation expectations were revised upward, and central banks that had been expected to cut rates have been forced to reconsider their positions. The confluence of higher energy prices, bond market stress, and equity market weakness represents the most significant financial disruption since the early weeks of the pandemic.