A possible deal between the United States and Iran to reopen the Strait of Hormuz would offer short-term relief to Asia, the region outside the Middle East that has borne the brunt of the economic fallout from the months-long war. However, the shock waves of the crisis are likely to spread until the end of the year, and perhaps well beyond.
. Over the past three and a half months, Asian currencies have fallen, inflation has soared and supply chain bottlenecks have begun to stifle industrial production.
These disruptions are due to Asia’s heavy dependence on energy and other raw materials passing through the Strait of Hormuz. More than four-fifths of the oil and liquefied natural gas passing through the waterway are typically destined for Asian markets.
On Sunday, President Trump said in a social media post that an interim ceasefire agreement between Washington and Tehran would reopen the strait and that he had authorized “the immediate lifting of the U.S. naval blockade” on Iranian ports. The deal is expected to be signed on Friday.
“Ships of the World, start your engines,” he wrote. “Let the oil flow!” »
If a deal to reopen the strait is reached, it will provide an immediate reprieve, allowing hundreds of tankers loaded with oil, gas and oil byproducts to begin making the month-long journey to Asian ports.
Still, industry experts and economists warn that with trade flows disrupted for so long, global markets will need considerable time to normalize, meaning high inflation and supply chain strains will likely persist until the end of the year.
For Asia, “the good news is that once the strait opens, oil and some gas comes back,” said Joshua Ngu, vice president of the Asia-Pacific region at energy consultancy Wood Mackenzie. The bad news, he added, is that over the past three months, “each day that the Strait remained closed, economic disruptions grew exponentially and spread further down the supply chain.”
These disruptions, Mr. Ngu said, “will not be resolved in a short period of time.”
In Asia, country leaders celebrated the ceasefire agreement on Monday. Markets across the region recovered, with benchmark stock indices in Japan and South Korea both climbing around 5 percent.
Japanese Prime Minister Sanae Takaichi wrote on X that the agreement was a “major step towards a resolution.” She also said she hoped that “free and safe navigation in the Strait of Hormuz would truly be ensured.”
In a joint statement, Australian Prime Minister Anthony Albanese and Foreign Minister Penny Wong said they were pleased the deal included measures to reopen the strait and restore freedom of navigation.
“While a full recovery will take time, restoring this vital trade corridor is critical to easing pressure on energy prices and economies, including in our region,” the statement said.
While Western countries have largely experienced the crisis at the gas pump and because of rising jet fuel prices, Asia has been grappling for months with a serious shortage of physical supply. Across developing Asia, forecasts for economic growth have been lowered as shortages of crude oil and natural gas force countries to ration electricity.
A return to safe shipping lanes would significantly improve the outlook for heavily energy-dependent countries in the Middle East, including Pakistan, Vietnam and the Philippines – the latter of which has declared a national energy emergency and ordered mandatory consumption cuts.
Richer economies, notably Japan and South Korea, relied on their deep pockets and strategic reserves to cushion the initial blow. However, even these industrial powers have faced soaring oil prices that have weighed on their currencies and supply disruptions that only a resumption of trade flows can begin to alleviate.
Economists fear that these pressures will persist beyond the immediate geopolitical crisis. The turnaround time alone — for ships to pass through the strait, reach their final destinations and return — will take months, a timeline that could easily slip away if fears of further Iranian aggression or a lack of insurance coverage keep the ships away.
Inflationary pressures linked to disruptions in the flow of oil, gas and their derivatives are also likely to prove tenacious. Liquefied natural gas prices in Asia, for example, are typically indexed to oil prices and operate with a lag of three to six months. This means that even if oil prices fall in June, high natural gas prices will likely persist through the end of the year.
“From a price increase perspective, we haven’t even necessarily seen that effect fully realized,” Wood Mackenzie’s Mr. Ngu said. In gas markets, “the $100 oil price we saw in March won’t be fully achieved for another three to six months,” he said. As a result, “we are still in a very precarious period.”
Supply chain challenges are also poised to drag on.
One of the greatest economic losses of the conflict was the global supply of fertilizer. Five major exporters – Iran, Saudi Arabia, Qatar, the United Arab Emirates and Bahrain – collectively supply more than a third of global stocks of urea, the dominant form of nitrogen fertilizer. The disruptions have already reduced the peak planting season across much of Southeast Asia, which runs from May to July.
“A disruption of about a month is manageable, but if it extends well into the planting season, the reduction in crop yields raises serious food security concerns,” said Albert Park, chief economist at the Asian Development Bank. “The impact will be delayed, meaning we likely won’t see the bulk of production shortfalls until later in the year.”
Elsewhere, companies in Japan and South Korea are facing shortages of naphtha, a petrochemical byproduct of crude oil refining used in plastic films and food packaging. Limited supplies of other products, including helium and liquefied petroleum gas, have strained everything from cooking to medical imaging.
For naphtha, getting supply chains back to normal will likely take at least a year after shipments to the Middle East resume, said Haruhiko Sakaino, an adviser to Japan’s Natural Resources and Energy Agency. The obstacles start with small businesses who must scramble to restart production. “It won’t be as simple as resuming imports,” he said.
“It’s like capillaries that have been destroyed. They take a long time to recover,” Mr. Sakaino said.
