Global Energy Trade Shaken as Persian Gulf Conflict Disrupts Oil and Gas Supplies

BY MIRABLE ODETA

Global energy markets have been thrown into turmoil as conflict around the Persian Gulf disrupts the flow of oil and natural gas shipments, driving fuel prices sharply higher and raising concerns about the stability of global supply chains.

The impact is being felt most strongly in Asia, where many economies rely heavily on imported fuel. Much of that energy passes through the Strait of Hormuz, a narrow but critical maritime corridor that handles roughly one-fifth of global trade in crude oil and liquefied natural gas (LNG).

According to energy consultancy Kpler, around 13 million barrels of oil per day passed through the strait in 2025. That volume represents about one-third of all seaborne crude oil shipments worldwide. Crude oil is later refined into fuels such as gasoline, diesel and jet fuel.

The strategic waterway is equally vital for natural gas supplies. Roughly one-fifth of the world’s LNG — natural gas cooled into liquid form for easier transport — moves through the strait. Data from the U.S. Energy Information Administration shows that more than 80% of LNG shipments passing through the route in 2024 were destined for Asian markets.

Since the war involving Iran began, the price of Brent crude — the global oil benchmark — has jumped about 15% to roughly $84 per barrel, marking its highest level since July 2024.

In response to rising risks to shipping, Donald Trump said the United States could offer insurance protection to shipping companies and may deploy naval forces to escort energy vessels if necessary. However, analysts warn the disruptions could ripple far beyond the Middle East.

When global supply becomes constrained, wealthier countries often outbid poorer nations for available cargoes, leaving less affluent economies struggling to secure fuel. Similar dynamics were observed during the energy shock triggered by Russia’s invasion of Ukraine in 2022.

“The crisis, with the closure of the Hormuz Strait as the latest development, would not only raise oil and gas prices but also grind global economic activity to a halt,” said Zulfikar Yurnaidi of the Association of Southeast Asian Nations Centre for Energy.

For Asia’s largest economies, the risks are particularly significant because of their vast energy needs.

China is the world’s largest crude oil importer, while India ranks third. A prolonged spike in oil prices could ripple through both economies, increasing transportation costs, raising industrial expenses and putting pressure on household budgets.

China remains the largest buyer of Iranian oil, importing roughly 1.4 million barrels per day from Iran last year, or about 13% of its seaborne crude imports, according to Kpler. However, Beijing has sought to diversify its energy sources and strengthen energy security through strategic petroleum reserves and expanded renewable energy use.

Analysts estimate that shipments already en route to China could cover four to five months of demand. The country also maintains significant emergency oil reserves, though the exact size remains undisclosed by the government.

China could also increase imports from Russia. Independent Chinese refiners, often called “teapots,” have been major buyers of discounted oil from sanctioned producers including Iran, Russia and Venezuela.

According to Muyu Xu, a senior crude analyst at Kpler, China is unlikely to face severe supply shortages. “The real question is at what price,” Xu said, noting that higher costs could still weigh heavily on the economy.

India faces a more immediate challenge. The country’s crude reserves can cover less than a month of demand, meaning supply disruptions could quickly translate into higher fuel costs and inflation. Analysts say India may consider resuming large-scale purchases of Russian crude despite pressure from Washington to limit such trade.

Energy analyst Vibhuti Garg of the Institute for Energy Economics and Financial Analysis said the next two weeks will be critical. If the conflict continues, rising energy costs could weaken the Indian rupee, increase borrowing costs and slow economic growth.

Few regions are as exposed to Middle Eastern energy supply disruptions as East Asia.

Japan imported about 2.34 million barrels of crude oil per day in January, roughly 95% of its total imports, according to its Ministry of Economy, Trade and Industry. The country is also one of the world’s largest LNG importers.

South Korea depends almost entirely on imported energy, with about 70% of its crude oil and 20% of its LNG coming from the Middle East, according to the Korea International Trade Association.

Taiwan also imports nearly all of its LNG supplies. Although the island has been trying to diversify its energy sources, about one-third of its LNG imports still come from Qatar, which recently halted LNG production after attacks on its facilities.

Japan and South Korea maintain large strategic energy reserves, while Taiwan has said its current supplies should cover demand through March. However, analysts caution that stockpiles are only temporary buffers, particularly for energy-intensive industries such as Taiwan’s semiconductor sector.

According to Grant Hauber of the Institute for Energy Economics and Financial Analysis, governments across the region are operating in a “hope for the best, prepare for the worst” mode.

He noted that some countries may regret not moving faster toward renewable energy sources, which could act as a natural hedge against fossil fuel supply disruptions.

Despite growing investment in clean energy, fossil fuels still dominate the energy mix in East Asia. Renewable energy accounts for less than 10% of power generation in South Korea and Taiwan and about 22% in Japan, according to the International Energy Agency.