Shock to LNG supply is the bigger war risk in Asia

Asia faces a dual energy shock from the Iran war, leading us to incorporate more stagflationary outcomes in our upcoming baseline revisions for most key Asian economies.

What you will learn in this report:

• Higher oil prices represent a classic terms-of-trade deterioration for energy importers, while disruption in the Strait of Hormuz risks a volume shock to LNG supply. Electricity systems, particularly in Northeast Asia, rely heavily on imported gas.
• The larger risk stems from LNG logistics rather than oil prices. Disruption to cargo flows – particularly from Qatar via the Strait of Hormuz – could force utilities to turn to the spot market, raising effective import prices and tightening electricity supply.
• In economies where gas is a significant chunk of power generation (such as advanced Asia), this also introduces a risk of short-circuiting the momentum in tech-led industrial production that has been anchoring the region’s growth cycle.