Asia’s biggest economies are bracing for fuel shortages and higher prices after Iran shut the Strait of Hormuz, a key artery for oil and gas shipments from the Middle East.
“Asian countries are particularly reliant on oil and gas from the Gulf region,” Sung Jinseok, a researcher at the National University of Singapore’s Energy Studies Institute, told Fortune. The region is the world’s fastest‑growing importer of oil, while production remains low due to depleting fields and limited new discoveries.
Around 19 million barrels of oil, or 20% of the global oil trade, passes through the Strait of Hormuz each day. On average, exports from the Gulf constitute 80% to 90% of oil brought into Japan, and 30% to 40% of oil imported into China.
Japan and South Korea, both major customers of Middle Eastern gas and oil, have also stressed that they have enough fuel stockpiled to handle demand, at least in the short term.
According to Sung, although countries like China have diversified their energy supply to include imports from Russia and Central Asia, and have significant domestic oil and gas production, “the level of dependency on exports from the Gulf remains high”.
The price of chartering a tanker has also skyrocketed. “A large tanker now costs around $436,000 per day,” Huxley says. “It’s very rarely been over $100,000 for the last few years, so this is a really significant increase.”
“Costs are rising, especially war-risk premiums and fuel from longer voyages. A diversion around the Cape of Good Hope can add more than a million dollars to a single trip,” Subramanian, of Fleet Management, explains. “Cargoes with tight delivery windows—especially energy shipments—feel the impact first.”
For now, Asian economies can rely on their reserves, says Sung, who notes that Japan and South Korea have substantial oil stockpiles that can last over 200 days. China, too, has stockpiles amounting to three to four months of oil imports, while India’s supply can sustain the country for about two months.
But if the Strait of Hormuz remains closed, energy shortages are likely to hike prices across Asian energy importers.
Asian countries have tried to diversify their sources of energy, turning to fossil fuel providers outside of the Middle East, including the U.S. They’ve also tried to increase their own domestic energy production, including in renewable energy, as well as making tentative moves towards setting up intra-regional trade in electricity.
Huxley suggests a different solution in the short term, arguing that navies need to work together with shipping companies to provide protection. He points to Operation Earnest Will, the 1987-1988 campaign by the U.S., the U.K. and other allied nations to protect tankers in the Gulf during the Iran-Iraq War, as an example. “Weapons are more sophisticated now, but the escort system is still a possibility,” Huxley concludes.
