A prolonged disruption of oil flows through the Strait of Hormuz is driving a shift in global risk pricing, with energy shortages, widening credit spreads, and rising inflation feeding into higher financing and reinsurance costs across Asia-Pacific.
The Strait remains one of the world’s most critical trade corridors, carrying about 20 million barrels of oil per day and roughly a quarter of global seaborne oil trade, along with significant volumes of LNG and fertilizers, according to UN Trade and Development. The disruption has reduced shipping flows sharply, with vessel traffic dropping by about 97% in early March compared with pre-conflict levels, based on UN data.
S&P Global Ratings identifies energy availability - not price - as the most significant threat to regional credit conditions. The Middle East accounts for about 40% of Asia-Pacific energy imports, leaving economies exposed to supply gaps that alternatives cannot quickly replace.
The impact extends across commodities moving through the corridor. About one-third of global seaborne fertilizer trade passes through the Strait, increasing exposure to agricultural supply risks and food price pressure when flows are disrupted.
Data from page two of the S&P report shows reliance on Middle Eastern LNG imports reaches 88% for Pakistan, 72% for Bangladesh, and 68% for India, with Hong Kong at 48%, Singapore at 43%, and Taiwan at 35%. Asia-Pacific overall stands at 29%.
Refinery dependence adds further exposure. Singapore sources about 74% of crude imports from the Middle East, while Korea and Malaysia each source about 69%, and Taiwan about 70%.
Transport and insurance costs are adjusting alongside commodity markets. UN data shows tanker freight rates rising sharply, with clean tanker rates up about 72% and dirty tanker rates up about 54% between late February and early March.
Marine fuel costs have also increased, with low-sulfur bunker fuel prices rising about 99% over the same period, while war-risk premiums for a $100 million vessel have increased from about $250,000 per voyage pre-crisis to as much as $1 million.
These shifts feed directly into reinsurance and underwriting conditions, with higher insured values, increased claims severity, and pricing adjustments across marine and trade credit lines.
The Philippines provides a case example of how energy disruption feeds into credit and insurance risks. The country imports about 95% of its crude oil from the Middle East, alongside 91% of propane/LPG and 35% of natural gas liquids, leaving it exposed to supply constraints tied to the Strait of Hormuz. Currency pressure is evident, with USD/PHP projected at 59.00–60.00 under US$90/bbl oil and 60.00–61.00 at US$100/bbl, compared with a 58.00 base case.
Each US$10/bbl increase in oil prices may raise inflation by about 0.6 percentage points and reduce GDP growth by about 0.2 percentage points, while oil at US$100/bbl could push GDP growth toward 3.7% in 2026 and widen the current account deficit to about 3% of GDP. The country holds about two months of petroleum inventory, though regional refinery disruptions and spillover effects across transport, electricity, and remittances - about 18% sourced from the Middle East - add to overall exposure.
Oil markets have already reacted, with prices rising above US$90 per barrel following the escalation. Historical relationships show that increases in oil and gas prices feed into fertilizer and food costs, adding to inflationary pressure across economies.
Under S&P’s downside scenario, Brent crude could peak at US$200 per barrel, average US$185 in the second quarter, and settle near US$130 for 2026. Inflation could increase by about 1 percentage point in China and by 1.4%-1.6% in India and Japan, with GDP growth declining by 0.3-0.4 percentage points.
The report states: “Energy availability - not prices - is the biggest threat to Asia-Pacific credit.”
Financial markets are responding to these pressures. As of March 19, 2026, speculative-grade dollar bond spreads widened by 70 basis points, while investment-grade spreads increased marginally.
Rising bond yields across Gulf economies since late February, indicating higher borrowing costs linked to the disruption. Benchmark yields have increased by about 25 basis points, currencies have weakened, and issuance slowed in early March, particularly for lower-rated borrowers.
Asia-Pacific GDP growth is projected at 4.5% in 2026, supported by technology exports and domestic demand. However, higher energy costs, supply disruptions, and trade policy uncertainty continue to weigh on activity.
Developing economies face additional pressure from rising energy, transport, and food costs, with limited fiscal space to absorb further shocks.
Energy-intensive sectors, including chemicals, transport, and airlines, face direct exposure to fuel supply constraints and higher input costs. The chemicals sector carries a negative outlook bias of -38% as of March 20, 2026.
Manufacturing sectors linked to semiconductors and electronics also face risks tied to energy supply disruptions and upstream material shortages.
For insurers, supply-chain disruptions and geopolitical tensions are linked to inflation, slower growth, and financial market volatility.
The report states: “Supply-chain disruptions and escalation in geopolitical tensions could fuel inflation, dampen economic growth and elevate financial markets volatility.”
Higher transport costs, rising claims severity, and financial market movements may affect underwriting margins and investment income, while prolonged disruption could increase operating costs and affect demand.
Geopolitical tensions, trade fragmentation, and commodity market disruptions are occurring at the same time, contributing to volatility in credit markets.
Corporate borrowers may face slower revenue growth alongside higher borrowing costs, while supply disruptions and inflation continue to affect operating conditions.
S&P Global Ratings notes that these combined factors are keeping risks elevated across Asia-Pacific credit conditions through 2026.
