Morgan Stanley Warns of Systemic Energy Crisis Across Asia

Financial services firm Morgan Stanley warned in a series of reports that conflict in West Asia and disruptions in the Strait of Hormuz are creating systemic risks for Asia's energy, chemical, and fertilizer value chains. The firm noted that 40-50 percent of oil needs for India and China pass through the Strait, while the broader region provides 34 percent of global crude and 19 percent of liquefied natural gas (LNG) exports.

Industrial impacts have been severe, with the curtailment of 25 million tonnes of petrochemical capacity and 10 million tonnes of fertilizer capacity across Asia. Feedstock shortages of propane and naphtha have forced plant shutdowns, driving downstream polymer prices up 15-25 percent over two weeks. In response, the Government of India has rationed LNG, increased cooking gas prices, and is increasing imports of Russian Urals crude following a 30-day U.S. sanction waiver. India is also negotiating with Iran to secure safe passage for over 20 tankers.

Other nations have implemented emergency energy-saving measures: Thailand ordered civil servants to work from home, the Philippines introduced a four-day work week for government officials, and South Korea implemented diesel subsidies and price caps. While regional reserves of 30 to 200 days provide a temporary buffer, Morgan Stanley warned that sustained price increases could push Asia's oil burden above its 10-year average. Globally, the crisis has triggered sharemarket sell-offs and forced central banks, including the Reserve Bank of Australia, to raise interest rates to combat inflation.