The Middle East conflict is unleashing a stagflationary shock on the world and Asia. Shipments bound for China and India account for the largest oil & gas flows via the Strait of Hormuz. For ASEAN, Thailand accounts for the largest flows, followed by Singapore.
Maybank IBG in its research report released on the eve of Hari Raya, estimates the global oil supply at risk from the blockade is 8mbpd, roughly 40% of the 20mbpd which passes through the Strait. Diversion of supply via pipelines (8.5mbpd); continued exports of Iranian oil (1.5mbpd); safe passage of Chinese and Indian tankers (5.9mbpd); release of stranded Russian oil (128mb) and oil reserves (650mb IEA, US and Japan) are mitigating factors. Non-OPEC producers, which account for 53% of global oil supply, can ramp up production (+1.2mbpd).
Polymarket is pricing in a 54% probability of a US-Iran ceasefire by end-June and 71% by end-Dec. This suggests the energy shock may last 1 to 2 quarters.
The Persian Gulf is also a global supplier of critical commodities, with a large share of global exports for urea fertilizer (49%), sulphur (45%), methanol (35%), helium (33%), ethylene (20%) and bitumen (18%). Shortages could disrupt petrochemical, mining, construction, transport and agricultural supply chains, and increase prices of related products, compounding the inflation shock. The Middle East accounts for a small (1.5% of ASEAN-5) but high-spending source of visitor arrivals. Flight disruptions could dampen tourism, as about 30% of air travel between Asia and Europe goes through Gulf air hubs, incl. Dubai and Doha. Thailand is most dependent on Middle East and Europe tourists (27% share).
The Philippines and Vietnam are most vulnerable, as 95% and 88% of their crude imports are sourced from the Persian Gulf respectively. Diesel import dependencies are less, with the highest for Singapore (16%), Malaysia (9%) and Indonesia (8%). Gas dependencies are sizeable, with Vietnam (49%) the most dependent, followed by Indonesia (37%) and Thailand (28%). Indonesia imports 75% of its sulphur from the Middle East, which is used to make sulphuric acid, a key input for nickel and copper smelting. Thailand is reliant on the Gulf for nitrogen fertilizers (67%) and urea fertilizer (74%). Thailand and Singapore are the two largest petrochemical producers in ASEAN, with the chemicals sector accounting for roughly 2% of GDP.
The house is trimming its ASEAN-6 GDP growth forecast to 4.5% in 2026 (from 4.8%) and 4.7% in 2027 (from 4.8%), with larger cuts in the Philippines (-0.4%), Vietnam (-0.4%) and Thailand (-0.3%). We raise our ASEAN-6 inflation forecast to +2.7% in 2026 (from 2.2%) and +2.7% in 2027 (from 2.5%), with higher adjustments for Thailand (+0.8% in 2026), the Philippines (+0.5%), and Indonesia (+0.5%). The energy price shock has short-circuited the monetary easing cycle.
Maybank expects central banks in the Philippines to hike 25bps and Singapore to tighten (via a steeper appreciation bias in April). Other ASEAN central banks will likely remain on hold in 2026. Higher energy prices and fuel subsidies will add to the fiscal burdens of Indonesia, Thailand and Malaysia. Indonesia’s 3% fiscal deficit ceiling may be tested if the oil shock is protracted. Malaysia (net energy exporter) and Singapore (large fiscal reserves) are n a better position to weather the fallout.
