Energy shocks loom as Asia rely on ME route for majority of fuel imports

Japan imports over 90% of its crude oil from the Middle East, whilst South Korea imports roughly 70%.

The Strait of Hormuz remains a primary chokepoint for Asian energy security, with 84% of crude oil and 83% of liquefied natural gas (LNG) shipments through the strait in 2024 bound for Asia, according to an Ember report.

“Combined with a potential halt in Qatari LNG production, it is a direct threat to the region's energy systems and overall economic stability,” the report said.

The level of dependence varies across Asian countries, with some nations almost entirely reliant on Middle Eastern oil and gas, such as Japan, which imports over 90% of its crude oil from the Middle East.

Additionally, South Korea sources roughly 70% of its crude oil from the Middle East, whilst Singapore sourced 42% of its total LNG imports from Qatar in 2024.

The report also highlights that fossil fuel dependence is not just a legacy issue but one that has grown in recent years.

In 2024, the largest gas markets in ASEAN and East Asia all imported at least 4% more gas than they did in 2023.

Excluding China, the largest gas-importing countries in these regions use gas for 34% to 92% of their total power generation.

“Because fossil fuel imports are typically denominated in US dollars, any price surge in these commodities puts immediate downward pressure on Asian currencies,” the report said.

Ember noted that this dynamic has historically led to "cost-push inflation," notably seen in 2023 when inflation hit 8.5% in Singapore and 6.1% in Thailand following previous energy market volatility.

The report further warned that a prolonged disruption in Middle Eastern supplies would likely trigger a "scramble" for alternative energy sources, pushing global prices higher, and disproportionately affecting economies with less diversified energy portfolios.

It could also widen wealth disparity as richer economies are better positioned to outbid emerging markets for limited spot-market cargoes, potentially widening socioeconomic gaps.