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Asia's oil lifeline at risk as Iran conflict threatens key trade routes
Oil buyers and traders across Asia are watching the escalation of a conflict around Iran with bated breath, as the top importing region braces for the impact of any disruption of exports from the Persian Gulf.
Asia buys more than four-fifths of all the crude produced in the Middle East, and 90 per cent of that goes through the Strait of Hormuz, according to data from Kpler SAS.
Here are three key concerns for the Asian market as the conflict expands:
The Iran-China link
China, the world's largest oil refiner, gets about 14 per cent of its crude from Iran, Kpler data show. Actual flows are likely higher, with some imports from the Islamic Republic masked as shipments from not just Malaysia, but also the United Arab Emirates and Oman, in order to circumvent US sanctions.
While China's larger state-owned processors seek to avoid breaching the bans, the country doesn't as a whole recognize unilateral US sanctions. And these discounted flows are vital for a hard-pressed private refining sector.
There's growing concern those shipments could be disrupted. That has boosted demand for crude that can load on the Indian Ocean side of the Strait, including Abu Dhabi's Murban and Omani crude. Other grades that may benefit from any threat to Iranian flows are Russian ESPO, which loads from the Far East port of Kozmino, as well as Angolan varieties.
Iran's fuel exports
Much of that supply eventually finds its way into ship-refueling hubs including Fujairah in the UAE, Singapore and Malaysia. The so-called straight-run fuel oil that can replace crude is typically exported to the relatively simple, low-margin processors in China known as teapots.
Iran also has a lot of natural gas — sharing one of the world's largest deposits with Qatar. While the Islamic Republic uses most of that domestically, it sells by-products including liquefied petroleum gas and condensates internationally.
China's giant plastics sector relies on Iran for almost a quarter of its imports of LPG, which can be used for cooking and heating but also processed into petrochemicals used as plastic building blocks. That relationship has only intensified after flows from the US, traditionally China's largest supplier, collapsed because of trade conflicts earlier this year.
'If there is a complete stoppage of Iranian LPG material or even, say, a halving of the average intake to China, China has few alternatives of substance,' said Samantha Hartke, head of market analysis for the Americas at Vortexa Ltd.
Iran's influence on key shipping routes
The vast majority of Asia's imports come through the Strait of Hormuz, making this waterway a focus for oil merchants. While Iran may choose not to block the conduit, it's also able to threaten the safety of navigation through the Red Sea — the shortest route between Asia and Europe — using proxies such as Yemen's Houthis. About 9 per cent of global seaborne trade normally passes through the Bab el-Mandeb chokepoint, or more than $2 trillion worth of goods a year.
That may affect Asia's supply from Russia, which has turned to markets in the East after being increasingly shunned by the US and traditional buyers in Europe because of its invasion of Ukraine in 2022. Ships carrying those massive volumes — ranging from flagship Urals crude to naphtha — must decide whether they continue to risk the Red Sea route, or face weeks of delays by going around South Africa instead.
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Hindustan Times
36 minutes ago
- Hindustan Times
Iran oil doomsday in Hormuz may be more fear than reality: Bousso
, not 55km , in paragraph 8) Iran oil doomsday in Hormuz may be more fear than reality: Bousso * US strikes on Iran spur fear of disruption to Middle East oil exports * Iran able to block the Strait of Hormuz, has tried in the past * Disruptions likely to be met by swift response from US Navy By Ron Bousso LONDON, - U.S. strikes on several Iranian nuclear sites represent a meaningful escalation of the Middle East conflict that could lead Tehran to disrupt vital exports of oil and gas from the region, sparking a surge in energy prices. But history tells us that any disruption would likely be short-lived. Investors and energy markets have been on high alert since Israel launched a wave of surprise airstrikes across Iran on June 13, fearing disruption to oil and gas flows out of the Middle East, particularly through the Strait of Hormuz, a chokepoint between Iran and Oman through which around 20% of global oil and gas demand flows. Benchmark Brent crude prices have risen by 10% to over $77 a barrel since June 13. While Israel and Iran have targeted elements of each other's energy infrastructure, there has been no significant disruption to maritime activity in the region so far. But President Donald Trump's decision to join Israel by bombing three of Iran's main nuclear sites in the early hours of Sunday could alter Tehran's calculus. Iran, left with few cards to play, could retaliate by hitting U.S. targets across the region and disrupting oil flows. While such a move would almost certainly lead to a sharp spike in global energy prices, history and current market dynamics suggest any move would likely be less damaging than investors may fear. CAN THEY DO IT? The first question to ask is whether Iran is actually capable of seriously disrupting or blocking the Strait of Hormuz. The answer is probably yes. Iran could attempt to lay mines across the Strait, which is 34 km wide at its narrowest point. The country's army or the paramilitary Islamic Revolutionary Guard Corps could also try to strike or seize vessels in the Gulf, a method they have used on several occasions in recent years. Moreover, while Hormuz has never been fully blocked, it has been disrupted several times. During the 1980s Iran-Iraq war, the two sides engaged in the so-called "Tanker Wars" in the Gulf. Iraq targeted Iranian ships, and Iran attacked commercial ships, including Saudi and Kuwaiti oil tankers and even U.S. navy ships. Following appeals from Kuwait, then-U.S. President Ronald Reagan deployed the navy between 1987 and 1988 to protect convoys of oil tankers in what was known as Operation Earnest Will. It concluded shortly after a U.S. navy ship shot down Air Iran flight 655, killing all of its 290 passengers on board. Tensions in the strait flared up again at the end of 2007 in a series of skirmishes between the Iranian and U.S. navies. This included one incident where Iranian speedboats approached U.S. warships, though no shots were fired. In April 2023, Iranian troops seized the Advantage Sweet crude tanker, which was chartered by Chevron, in the Gulf of Oman. The vessel was released more than a year later. Iranian disruption of maritime traffic through the Gulf is therefore certainly not unprecedented, but any attempt would likely be met by a rapid, forceful response from the U.S. navy, limiting the likelihood of a persistent supply shock. HISTORY LESSON Indeed, history has shown that severe disruptions to global oil supplies have tended to be short-lived. Iraq's invasion of neighbouring Kuwait in August 1990 caused the price of Brent crude to double to $40 a barrel by mid-October. Prices returned to the pre-invasion level by January 1991 when a U.S.-led coalition started Operation Desert Storm, which led to the liberation of Kuwait the following month. The start of the second Gulf war between March and May 2003 was even less impactful. A 46% rally in the lead-up to the war between November 2002 and March 2003 was quickly reversed in the days preceding the start of the U.S.-led military campaign. Similarly, Russia's invasion of Ukraine in February 2022 sparked a sharp rally in oil prices to $130 a barrel, but prices returned to their pre-invasion levels of $95 by mid-August. These relatively quick reversals of oil price spikes were largely thanks to the ample spare production capacity available at the time and the fact that the rapid oil price increase curbed demand, says Tamas Varga, an analyst at oil brokerage PVM. Global oil markets were also rocked during the 1973 Arab oil embargo and after the 1979 revolution in Iran, when strikes on the country's oilfields severely disrupted production. But those did not involve the blocking of Hormuz and were not met with a direct U.S. military response. SPARE CACITY The current global oil market certainly has spare capacity. OPEC , an alliance of producing nations, today holds around 5.7 million barrels per day in excess capacity, of which Saudi Arabia and the United Arab Emirates hold 4.2 million bpd. The concern today is that the vast majority of the oil from Saudi Arabia and the UAE is shipped via the Strait of Hormuz. The two Gulf powers could bypass the strait by oil pipelines, however. Saudi Arabia, the world's top oil exporter, producing around 9 million bpd, has a crude pipeline that runs from the Abqaiq oilfield on the Gulf coast in the east to the Red Sea port city of Yanbu in the west. The pipeline has capacity of 5 million bpd and was able to temporarily expand its capacity by another 2 million bpd in 2019. The UAE, which produced 3.3 million bpd of crude oil in April, has a 1.5 million bpd pipeline linking its onshore oilfields to the Fujairah oil terminal that is east of the Strait of Hormuz. But this western route could be exposed to attacks from the Iran-backed Houthis in Yemen, who have severely disrupted shipping through the Suez Canal in recent years. Additionally, Iraq, Kuwait and Qatar currently have no clear alternatives to the strait. It is possible that Iran will choose not to take the dramatic step of blocking the strait in part because doing so would disrupt its own oil exports. Tehran may also consider any further escalation fruitless in light of U.S. involvement and will instead try to downplay the importance of the U.S. strikes and come back to nuclear negotiations. In the meantime, spooked energy markets, fearing further escalation, are apt to respond to the U.S. strikes with a sharp jump in crude prices. But even in a doomsday scenario where the Strait of Hormuz is blocked, history suggests markets should not expect any supply shock to be persistent. Enjoying this column? Check out Reuters Open Interest , your essential new source for global financial commentary. ROI delivers thought-provoking, data-driven analysis. Markets are moving faster than ever. ROI can help you keep up. Follow ROI on LinkedIn and X. This article was generated from an automated news agency feed without modifications to text.
The Hindu
38 minutes ago
- The Hindu
Markets slump on heightened tensions in Middle East; Sensex drops 500 points
Stock market benchmark indices Sensex and Nifty tumbled on Monday (June 23, 2025), as intensifying tensions in the Middle East after the U.S. bombed three major nuclear sites in Iran unnerved investors. After losing over 900 points in day trade, the 30-share index recovered some lost ground to close with a loss of 511.38 points or 0.62% at 81,896.79. During the day, it tumbled 931.41 points or 1.13% to 81,476.76. The 50-share NSE Nifty dropped 140.50 points or 0.56% to 24,971.90. The U.S. bombed three major nuclear sites – Fordow, Natanz and Isfahan – in Iran, directly engaging itself in the Israel-Iran conflict. From the Sensex pack, HCL Tech, Infosys, Larsen & Toubro, Mahindra & Mahindra, Hindustan Unilever, ITC, Tata Consultancy Services and Maruti were the biggest laggards. In contrast, Trent, Bharat Electronics, Bajaj Finance and Kotak Mahindra Bank were among the gainers. In Asian markets, South Korea's Kospi and Japan's Nikkei 225 index settled lower, while Shanghai's SSE Composite index and Hong Kong's Hang Seng ended higher. European markets were trading lower in mid-session. U.S. markets ended mostly lower on Friday (June 20, 2025). Global oil benchmark Brent crude climbed 0.49% to $77.39 a barrel. 'Last Friday (June 20, 2025), markets buildup in anticipation of easing Middle East tensions, following the U.S. announcement of a two-week window to deliberate its involvement in the Israel-Iran conflict. However, the unexpected U.S. airstrike on Iran's nuclear facilities over the weekend disrupted those expectations, triggering a sharp rise in crude oil prices and leading to consolidation in the domestic equity market,' Vinod Nair, Head of Research, Geojit Investments Limited, said. 'Despite the initial setback, the market recovered some of its losses, supported by gains in capital goods and metal stocks, as fears of an immediate oil supply disruption remained low,' he added. Foreign Institutional Investors (FIIs) bought equities worth ₹7,940.70 crore on Friday (June 20, 2025), according to exchange data. On Friday (June 20, 2025), the 30-share BSE Sensex surged 1,046.30 points or 1.29% to settle at 82,408.17. The Nifty climbed 319.15 points or 1.29% to 25,112.40.
Mint
39 minutes ago
- Mint
FPIs turn sellers in June after 2-month buying streak. Will Iran-Israel tensions trigger more outflows?
Stock market today: Rising tensions in the Middle East appear to have caught the attention of overseas investors, who turned bearish on the Indian stock market in June after two consecutive months of net purchases. FPIs have alternated between buying and selling so far this month but have largely stayed on the sidelines in most sessions, withdrawing ₹ 4,192 crore through exchanges, according to NSDL data. The escalating conflict between Iran and Israel — with the U.S. now officially entering the war by launching attacks on Iran alongside Israel — has brought fresh concerns to Indian stock market, impacting the sentiment of overseas investors, especially as Indian stock market are already viewed as expensive compared to other Asian peers. Despite continued FPI selling, the Indian stock market has remained resilient in June so far, with both front-line indices gaining nearly 1%, thanks to strong support from domestic institutional investors (DIIs), primarily driven by mutual funds. DIIs acquired shares worth over ₹ 59,000 crore in June so far, following net purchases of ₹ 66,194 crore in May. Mutual funds alone contributed more than ₹ 35,900 crore in June, compared to ₹ 53,260 crore in the previous month. Although FPI inflows have fluctuated over the past six months, strong domestic buying has helped sustain market momentum — even amid heightened geopolitical tensions, global trade war concerns, and rich valuations. FPIs turned into net buyers in April by infusing ₹ 4,223 crore, according to the depositories data. Before this, foreign portfolio investors (FPIs) had pulled out ₹ 3,973 crore in March, ₹ 34,574 crore in February, and a substantial ₹ 78,027 crore in January. Dr. V.K. Vijayakumar, Chief Investment Strategist at Geojit Financial Services, said, "After a big buy figure of ₹ 19,860 crore in May, FIIs turned less confident in June, with bouts of selling and buying. Net FII activity in June till the 20th is a sell figure of ₹ 4,192 crore (NSDL)." He added that in the first half of June, FIIs were sellers in FMCG, power, consumer durables, and IT sectors, while they were buyers in financials, chemicals, capital goods, and real estate. 'The buying reflects fair valuations and good prospects in those segments, while the selling points to relatively high valuations and diminished outlook in others,' he explained. FIIs have also remained net sellers in the debt market. 'The yield differential between U.S. and Indian sovereign bonds is at a historic low of around 2%. Given the currency risk, investing in Indian bonds doesn't make sense currently, and this trend of FPI selling in bonds is likely to continue,' Dr. Vijayakumar noted. Vipul Bhowar, Senior Director – Listed Investments at Waterfield Advisors, stated that the trend of Foreign Portfolio Investment (FPI) reversed in April and strengthened considerably in May, marked by positive inflows. The inflows in May were the highest in eight months, indicating a resurgence of interest from foreign investors in Indian markets. However, he noted that geopolitical tensions, including the ongoing conflict between Israel and Iran, along with broader global uncertainties, have led to a cautiously optimistic approach in June. He added that improving domestic fundamentals and a favorable long-term growth outlook suggest that, if global conditions stabilize, India could witness more sustained and stable FPI inflows in the future. Vijayakumar, echoed this view, stating that global uncertainty dominated by geopolitics — particularly the war in West Asia — will continue to shape FPI activity going forward. Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.
