Iran crisis puts Asia on alert for LNG scramble and US$100 oil

[SINGAPORE] Asian markets, including Singapore, could face an intense scramble for liquefied natural gas (LNG) if the conflict in Iran escalates and threatens supply, analysts told The Business Times.

The region’s petrochemical refiners could also face disruptions to feedstock supply, while surging oil prices – in the worst case breaching US$100 a barrel – could stoke inflation and be a drag on growth.

Oil prices have soared following the US-Israeli strikes on Iran. Brent crude notched a high of US$82.37 a barrel in early Asian trade on Monday (Mar 2). The US oil benchmark, West Texas Intermediate crude, rose 6.95 per cent to US$71.68, having touched US$75.33 earlier, the highest since June 2025.

Jaison Davis, economic research analyst at GlobalData, said: “Markets are pricing in the threat… with prices now driven more by shipping security and vessel availability than upstream supply. The market is treating this as a logistics shock, not a production shock.”

The price surge comes as activity in the Strait of Hormuz – through which 20 per cent of global oil passes – came to a near-standstill following the attack and Iran’s subsequent strikes on neighbouring countries.

If trade flows through the strait normalise but Iranian oil imports remain affected, dated Brent prices could stay at about US$80, said Wang Zhuwei, director of oil trading research at S&P Global Energy.

But prices could exceed US$100 if a larger disruption persists – for instance, if seven million to eight million barrels a day are off the market for months.

Asian energy markets and electricity consumers will “surely feel the pinch” if prices go up, said June Goh, senior oil market analyst at Sparta Commodities.

“The extent of the price escalation will depend on how protracted the disruptions in the Strait of Hormuz (are), and how much oil infrastructure will be targeted in the coming days of the war,” she said.

“Intense competition” for gas

The crisis is not just about oil, but also LNG – which Asian markets procure in large quantities from the Middle East, especially Qatar.

Davis said: “LNG markets have less flexibility than oil in the short run. If Qatar’s cargos are delayed, Asian buyers face immediate replacement risk, bidding up spot prices and freight. That feeds into electricity costs, industrial margins and headline inflation across importing economies – turning a regional security event into a global macro shock.”

Chong Zhixin, director of Asia gas research at S&P Global Energy, expects LNG prices to be volatile, given the uncertainty over near-term supply.

“In the interim, we are likely to see companies source for additional supplies outside the region. However, given (the significance of) Qatari volumes, there will be intense competition among Asian buyers,” he said.

With European gas storage levels being low, competition between Asia and Europe for LNG supply could intensify, potentially pricing out developing Asian markets if disruptions are prolonged, he added.

Singapore and Thailand are especially at risk, given their high reliance on LNG from Qatar. Volumes from the emirate accounted for nearly half (48 per cent) of Singapore’s total LNG supply in 2025.

“Should companies supplying Singapore invoke force majeure on their contracts, alternatives will have to be sought,” said Chong.

The Republic could get some relief by stepping up piped-gas imports from Malaysia and Indonesia. However, its centralised gas buyer, GasCo, may need to intervene to secure additional spot LNG cargoes, he reckons.

Impact on refiners

A prolonged shipping crisis in the Strait of Hormuz could also hit Asian petrochemical refiners, with delays in vessels transporting crude oil, also known as very large crude carriers (VLCCs).

Sparta Commodities’ Goh said that while refineries typically hold a week’s worth of stocks to manage delays in VLCCs, these vessels now have “messed up” schedules.

She expects Asian refineries – save for China state-owned refiners with strategic petroleum reserves – to reduce throughput, or the volume of crude oil processed during a particular period.

With the conflict, Asian refiners face the risk of feedstock delays, higher delivered crude costs, and operational disruption from timing mismatches, said Wang of S&P Global Energy.

“Even if physical barrels are not fully lost, slower vessel movement and sharply higher war-risk premiums raise replacement costs and can force refiners to draw inventories, re-optimise crude slates, or trim runs if prompt Middle East grades become harder to secure,” he said.

Steam crackers relying on the Middle East for imports of naphtha and liquefied petroleum gas (LPG) could also be hit. These facilities, which convert naphtha and LPG into essential petrochemicals, may trim operating rates to preserve margins.

Feedstock from other locations could come with longer voyage times, higher freight and less operational flexibility, said Wang.

Impact on growth and energy security

A sustained energy crisis could ultimately affect growth in the region.

Every sustained rise in oil prices of US$10 a barrel could hit Asia’s GDP growth by 20 to 30 basis points, said Morgan Stanley in a note on Monday.

Its report noted that Asia is the most oil import-dependent region, with its oil and gas trade balance at -2.1 per cent of GDP, compared with -1.5 per cent in the euro area and 0.04 per cent in the US.

A brief spike above US$80 a barrel is “unlikely to derail global growth, but a sustained move higher would carry clear stagflation risks”, said OCBC Group Research in a Monday report.

In a separate report, OCBC economists noted that the region’s net petroleum importers – India, Indonesia, Malaysia, the Philippines, Thailand, and Vietnam – are exposed to a deterioration in trade balances.

In addition, persistently higher oil prices in the rest of 2026 will likely have a material impact on inflation in the region, said OCBC chief economist Selena Ling and senior Asean economist Lavanya Venkateswaran in the report.

The biggest impact would be on the Philippines, where inflation could be pushed up by 0.6 percentage points, they estimated. This would be followed by Singapore, India and Vietnam.

That said, some markets may be more insulated. “Thai authorities have some room to cushion against inflationary pressures using the oil fund, while the presence of fuel subsidies in Indonesia will help buffer the impact,” Ling and Venkateswaran noted in the report.

Looking ahead, whichever way oil prices move, Asian governments will be prioritising energy security.

Policymakers may release energy stockpiles or even impose an outright ban on petroleum exports to safeguard domestic energy needs, said Goh of Sparta.

As Rystad Energy noted in a report on Monday: “The time is never right for a global supply shock, but this one catches global markets in a particularly vulnerable state.”