South Korea and Taiwan face heightened economic risks from surging LNG prices after Qatar’s export disruption, with analysts at MUFG Bank warning that energy-driven inflation could keep both central banks cautious on monetary policy
South Korea and Taiwan appear particularly vulnerable to a sustained surge in liquefied natural gas (LNG) prices after supply disruptions in the Middle East triggered a sharp spike in Asian spot rates, according to analysts at MUFG Bank.
In a research note on Thursday, analyst Lloyd Chan said both economies face heightened risks from elevated gas prices because of their heavy dependence on imported LNG and the significant role of natural gas in their power generation mix.
“Both have a relatively high share of natural gas in electricity generation and import nearly all of their gas requirements, leaving them vulnerable to a sustained period of elevated gas prices,” Chan wrote.
Qatar outage jolts LNG markets
LNG prices have risen sharply following the shutdown of Qatar’s largest LNG export plant after Iranian attacks. Qatar is among the world’s top LNG exporters, alongside the United States and Australia, and about 20 per cent of global LNG trade transits the Strait of Hormuz.
Crucially for Asia, around 86 per cent of LNG volumes passing through Hormuz are delivered to the region, with China, India, Taiwan and South Korea accounting for roughly 60 per cent of those flows. Any prolonged disruption therefore threatens to tighten supply conditions for key Asian buyers already grappling with volatile energy markets.
While oil prices have not surged to the extreme levels seen during the Russia–Ukraine conflict, the sharper move in LNG markets presents a more direct inflationary risk for import-dependent Asian economies, the report said.
Inflation risks cloud policy outlook
For South Korea and Taiwan, higher LNG prices could feed into electricity tariffs and broader consumer prices, complicating the monetary policy outlook.
“The rising risk of energy-driven inflation could keep both the Bank of Korea and Taiwan’s central bank cautious,” Chan said , suggesting policymakers may be reluctant to pivot aggressively towards easing even if growth momentum softens.
South Korea’s benchmark KOSPI index has already fallen sharply over the past two sessions, reflecting investor concerns about the impact of higher energy costs on corporate margins and domestic demand.
For export-oriented economies such as South Korea and Taiwan, a prolonged period of elevated LNG prices could squeeze trade balances, pressure currencies and add to input costs for manufacturers — particularly in energy-intensive sectors such as semiconductors and heavy industry.
Broader regional contrasts
The shock is not uniform across Asia. Malaysia, for instance, may benefit from higher oil prices given its status as a net energy exporter, with improved terms of trade potentially supporting the ringgit, the MUFG report noted.
Still, for much of North Asia, the combination of supply disruptions in the Gulf and heavy reliance on imported gas underscores the region’s structural exposure to geopolitical energy shocks. If LNG prices remain elevated, the resulting inflationary impulse could narrow the room for policy manoeuvre just as global growth risks begin to mount.
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