BY COMFORT OGBONNA
The ongoing conflict involving Iran is raising serious concerns about a potential economic crisis across Asia, as leaders warn that disruptions to critical energy supplies could have far-reaching consequences. Vivian Balakrishnan cautioned that the situation has already taken on the dimensions of a regional emergency, particularly due to Asia’s heavy dependence on Middle Eastern oil and gas.
He described the closure of the Strait of Hormuz as, in effect, “an Asian crisis,” highlighting how deeply interconnected the region’s economies are with energy flows through this vital corridor. The strait, which facilitates roughly 20% of global oil and liquefied natural gas shipments, has become a focal point of the conflict, with its shutdown sending shockwaves through global markets.
In extended remarks, Balakrishnan questioned both the necessity and legality of the war involving the United States and Israel against Iran, warning that the broader consequences could destabilize the global economy. He argued that the conflict has effectively placed the entire world economy under strain, raising the risk of a financial crisis if the situation continues to escalate without resolution.
Oil prices have already surged as a result of the disruption, intensifying fears of renewed global inflation. With no clear timeline for de-escalation, markets remain highly volatile, and governments are bracing for prolonged instability. While the United States has become a net exporter of oil in recent years, many Asian economies remain heavily reliant on crude imports from the Middle East, leaving them particularly exposed.
Asia, the world’s largest oil-importing region, sources nearly 60% of its crude oil and petrochemical feedstock from the Middle East. This dependence has now become a major vulnerability. Countries such as China have already begun halting refined fuel exports, while petrochemical plants and refineries across the region are scaling back operations or declaring force majeure due to supply shortages and rising costs.
Roughly 80% of the oil passing through the Strait of Hormuz is destined for Asian markets, underscoring the disproportionate impact the disruption is having on the region. Although this vulnerability has long been recognized, Balakrishnan noted that it has never been tested to such an extreme level before, making the current crisis particularly alarming for policymakers and industry leaders alike.
The trajectory of the crisis may hinge on whether Donald Trump follows through on threats to escalate military action if shipping through the Strait of Hormuz is not restored. Iran has responded with warnings of its own, suggesting it could target Israeli infrastructure and facilities supporting U.S. operations in the Gulf, raising the risk of further escalation.
In light of these developments, Asian governments are being urged to accelerate long-term structural changes to reduce their vulnerability. These include investing more heavily in renewable energy, strengthening power grid resilience, modernizing digital infrastructure, and retraining workforces to adapt to shifting economic conditions. At the same time, policymakers must maintain fiscal discipline and guard against financial instability, including potential currency volatility or capital flight.
Balakrishnan also expressed disappointment that diplomatic efforts between the United States and Iran had failed to prevent the outbreak of hostilities. He noted that the conflict was neither expected nor, in his view, necessary, and reiterated concerns about its broader implications for global stability.
Despite its close ties with both major powers, Singapore is seeking to maintain a balanced and independent stance. The country has long-standing security and investment relationships with the United States, while also engaging in significant trade with China. Balakrishnan emphasized that Singapore’s decisions will continue to be guided by its own national interests rather than external pressure, even if that means occasionally diverging from either side.
As the conflict continues into its fourth week, the risks to Asia’s economic stability and to the global economy more broadly remain elevated, with energy supply disruptions at the heart of the unfolding crisis.
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