Prolonged tensions in the Gulf could push up oil prices, pressure Asian currencies and equities, and widen macro risks for oil-importing economies such as India, according to a new report.
Asia remains the most vulnerable region globally to sustained increases in oil prices due to its heavy dependence on imported energy and its highly trade-exposed economies, according to a new report by global investment manager Invesco.
In a report titled ‘Middle East Tensions – Impact on Asia’, Invesco warned that a prolonged geopolitical shock in West Asia that disrupts crude exports from the Gulf could materially affect the region’s macroeconomic outlook, financial markets and currencies.
“A sustained move higher in oil prices would be negative for stocks, including Asian equities,” the report said, noting that the impact on financial markets would depend largely on the duration and intensity of the conflict.
However, the report added that if the geopolitical tensions ease quickly, the negative impact on Asian markets is likely to remain short-lived.
Asia’s vulnerability stems largely from its heavy reliance on imported energy and the region’s openness to global trade flows. Major oil-importing economies such as India, Japan and South Korea remain particularly exposed to energy price shocks, especially if supply disruptions occur in the Gulf.
The report highlighted that currencies such as the Indian rupee and the Korean won could face near-term headwinds if oil prices remain elevated, reflecting higher import bills and increased pressure on current account balances.
At the same time, the impact across the region is unlikely to be uniform. While most Asian economies would face economic headwinds from higher oil prices, energy exporters such as Malaysia could benefit from stronger crude prices.
Separately, Emkay Global Financial Services also warned that escalating tensions in the Middle East could heighten macroeconomic risks for oil-importing countries such as India.
In a note assessing the geopolitical situation, Madhavi Arora, chief economist at Emkay, said the widening conflict between the United States and Iran has increased the risk of supply disruptions, shipping delays and higher freight and insurance costs, even if a full blockade does not materialise.
India remains particularly exposed because a large share of its crude oil and liquefied natural gas imports pass through the Strait of Hormuz — one of the world’s most critical energy chokepoints.
Emkay noted that India’s diversified sourcing, strategic petroleum reserves and operational inventories currently provide adequate buffers against short-term disruptions.
However, sustained increases in crude prices could quickly transmit into domestic fuel prices and inflation. According to the brokerage, every $1 per barrel increase in Brent crude could push diesel prices up by about Rs 0.52 per litre and petrol prices by around Rs 0.55 per litre.
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