The escalating conflict involving Iran, the U.S., and Israel has prompted Tehran to threaten closure of the Strait of Hormuz, a critical chokepoint for global oil and liquefied natural gas (LNG) shipments. The Strait handles approximately 21 million barrels per day of oil, representing about one-fifth of global consumption, as well as substantial LNG flows, making Asia particularly vulnerable due to its heavy reliance on Middle Eastern energy imports [1].
If oil and gas flows are halted for two weeks, it would send a shock wave through the global energy system, with prices expected to surge. Brent crude has already climbed above $95 per barrel amid rising tensions, and analysts warn that prices could easily spike past $120 if hostilities escalate and tankers are impeded [1]. Technical analysis indicates oil prices are approaching resistance levels last seen during the 2022 Ukraine crisis, with traders eyeing $110 and $120 as next resistance targets and support near $88/barrel. Sharp volatility is expected in the event of headline-driven trading [1].
Asian countries such as China, India, Japan, and South Korea are major importers of crude and LNG from the region. While many maintain strategic petroleum reserves—typically enough to cover 30-90 days of imports—the ability to tap and distribute these reserves efficiently varies. Japan and South Korea have robust infrastructure, whereas India faces logistical challenges [1]. The LNG market is also at risk, as Qatar, the world's largest LNG exporter, ships most of its cargo through the Hormuz Strait. A closure would disrupt supply contracts and force buyers to seek alternative sources, likely at higher prices [1].
Financial markets are closely monitoring the situation. Oil futures have priced in a risk premium, and energy stocks have rallied, reflecting expectations of higher margins for producers. However, Asian refiners may face tighter margins as feedstock costs rise. Traders are hedging exposure via options and futures, and market sentiment remains cautious [1]. If the conflict is prolonged or worsens, Asia's energy security will be tested not only by price shocks but also by the logistical challenge of securing alternative supplies and managing demand. Policymakers may need to consider rationing or subsidies to cushion consumers and industries [1].
CONCLUSION
The threat of a closure of the Strait of Hormuz by Iran has significantly increased risk premiums in global energy markets, with Brent crude prices rising and further spikes possible if hostilities escalate. Asia's energy resilience is set to be severely tested, and policymakers may need to intervene if disruptions persist. Market sentiment is cautious, and volatility is expected to remain high.