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Supply disruptions from West Asia tensions could spread beyond oil and affect several industries across Asia if the conflict drags on, Morgan Stanley said in a report.
The Morgan Stanley report warned that energy supplies and key industrial materials from the region are critical for many Asian industries and economies. West Asia plays a major role in the global trade of oil, gas, and other raw materials. Many Asian countries depend heavily on imports from the region for energy and industrial inputs. If supply disruptions continue for a longer period, the effects could spread across sectors such as agriculture, manufacturing, and transport, it said. "The rise in oil prices, if sustained, will take Asia's oil burden from to above its 10-year average. But beyond the rise in oil prices, we are more concerned about potential disruption risks to supply (i.e., quantities getting curtailed) in the case of LNG. India, Thailand, Korea, and Taiwan are the economies which are most exposed on this front," the report read. Energy products remain the biggest concern. The West Asia region accounts for a large share of global exports of crude oil, liquefied natural gas (LNG), and liquefied petroleum gas (LPG). For example, the region supplies about 34 per cent of global crude oil exports and around 19 per cent of LNG exports. Beyond oil and gas, the region is also a major supplier of raw materials and industrial inputs. These include fertilisers, sulphur, aluminium, helium, and petrochemicals. These materials are widely used in industries such as agriculture, chemicals, semiconductors, construction, and automotive manufacturing. Morgan Stanley said some early signs of disruption have already appeared in Asia. India has introduced rationing of LNG and raised prices for cooking gas. South Korea is considering fuel price caps and subsidies, while Thailand has asked some government employees to work from home to reduce fuel use. The Philippines has also introduced a four-day work week for government officials to conserve energy. Several Asian economies are particularly exposed to energy supply risks. Taiwan, South Korea, and Thailand rely heavily on imported LNG from the Middle East and have limited inventories of natural gas. This makes it harder for them to quickly replace supplies if disruptions occur. Oil is another key vulnerability. Many countries in the region import a large share of their crude oil from the Middle East, with Japan and South Korea among the most dependent. A rise in oil prices could increase inflation and put pressure on trade balances across Asia. Morgan Stanley said that if tensions continue, disruptions could expand beyond energy to affect production and exports across Asia in the coming weeks. Governments and industries will need to closely watch supply chains and trade data for signs of further stress. (ANI)
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