Governments in Asia, the top oil-importing region, are seeking alternatives to shield economies from the energy crisis triggered by the Iran war. The Asian Development Bank cut its growth forecast for developing Asia to 4.7% this year. Oil imports to the region plunged 30% in April.
The energy crisis, triggered by the Iran war at the end of February, has led to the near-closure of the Strait of Hormuz, a chokepoint for one-fifth of global oil and gas supplies. Kpler data shows Asia's oil imports, which take 85% of Gulf crude shipments, plunged 30% in April to the lowest since October 2015.
The Asian Development Bank cut its growth forecast for developing Asia and the Pacific to 4.7% this year and 4.8% in 2027, from 5.1% previously for both, while raising inflation to 5.2%. Governments, especially in South Asia, are spending billions on subsidies and import duty waivers. “The first line of defense … is that the governments decided to absorb the initial shock by either providing subsidies or cutting excise duties on fuel products,” said Hanna Luchnikava-Schorsch of S&P Global Market Intelligence.
Asia's emerging market currencies like the Philippine peso, Indian rupee, and Indonesian rupiah hit record lows against the dollar. The peso has dropped more than 5% since the war began. China's yuan rose 0.8%, the top regional performer, while Japan intervened to lift the yen 0.4% above pre-war levels.
South Asian economies including Pakistan, Bangladesh, and Sri Lanka are most vulnerable, per S&P Global Market Intelligence. Pakistan issued its first LNG tenders since 2023 at $18.88 per million British thermal unit, far above pre-war market prices. On May 1, Japan began releasing 36 million barrels from stockpiles.
