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Biman Mukherji

Asian economies heavily dependent on imported energy are facing an even sharper squeeze after the shutdown of Saudi Arabia’s East-West pipeline removed a key escape route from the disruption in the Strait of Hormuz, deepening an energy shock that has already pushed crude oil above US$100 a barrel.
Analysts said the loss of that bypass would hit Asian refiners first before feeding through to inflation, currencies and economic growth across the region.
Saudi Arabia, the world’s largest oil exporter, confirmed that the pipeline was shut as a precaution following an attack last week but did not disclose the extent of the damage, the number of affected pumping stations or a timetable for restarting operations, according to a Rystad Energy report on Monday.
The closure leaves Saudi Arabia with fewer ways to keep crude moving to Asian buyers, raising the risk of delayed or reduced deliveries if the outage drags on.
Benchmark Brent crude oil, which surged to US$108 a barrel following the attack, was trading at US$104.6 during Asian evening hours on Friday, up more than 70 per cent year to date.

Before the attack, Saudi crude reaching Yanbu on the Red Sea coast could bypass the contested Strait of Hormuz, with tankers then able to head south through Bab el-Mandeb towards India and the rest of Asia or move north towards Egypt.
Rystad said Saudi Arabia had increasingly favoured the northern route because of the growing threat of attacks by Houthi militants.
Flows through Bab el-Mandeb should decline because fewer Saudi cargoes would be available to sail south, although the reduction would be partly obscured by already loaded vessels and non-Saudi traffic, Rystad added.
Asian oil refiners have the greatest direct exposure. Most Chinese and Indian customers had been instructed to lift September barrels from Yanbu, while Japanese and South Korean customers had increasingly been offered supplies through Sidi Kerir, an alternative route, the report said.
The market should therefore first see delayed or reduced deliveries into China and India, it said.
Janiv Shah, vice-president at Rystad, told This Week in Asia that Thailand, the Philippines and Vietnam were among the most exposed to the oil supply disruption because of their dependence on imported energy and the resulting impact on transport, manufacturing and electricity costs.
“Pakistan, Sri Lanka and Bangladesh are more vulnerable through inflation, foreign exchange rates and balances, while India faces a substantial increase in its overall import bill,” he said, adding that while Japan and South Korea were also highly import-dependent, they had stronger financial and strategic stock buffers.

Shah warned the development was likely to weigh on Asian countries’ economic growth.
“A short-lived price above US$100 per barrel should slow growth, but prices remaining elevated for multiple months would raise inflation, weaken consumption and increase fiscal pressures. The likely outcome is slower, more inflationary regional growth rather than an immediate recession,” he said.
The recent disruption would challenge global supply and demand “as we flip from a relatively balanced market currently to one that is heavily undersupplied in the next few months”, said the Rystad report.
An Oxford Economics report published on September 10 noted that neither an oil price shock nor higher trade tariffs imposed by the US had derailed Asia’s economic growth this year, driven by demand for AI-related hardware.
However, it predicted the region’s growth would drop by around 0.4 percentage points to 4.2 per cent next year, noting that Asian governments had absorbed much of the initial energy shock to protect consumers.
“Asian economies would feel the shock unevenly but the direction is clear. Southeast Asia would be particularly exposed because it sources close to 60 per cent of its crude from the Middle East,” said Ausaf Sayeed, India’s former ambassador to Saudi Arabia and Yemen.
He noted that regional officials had estimated the pipeline would remain largely out of service for three to five weeks.
The pressure would spread through several channels, including larger import bills and current account deficits, higher prices for food, fuels and fertiliser, as well as weaker currencies and heavier subsidy outgo for their governments, he added.
US tariff threat
India, Asia’s second-largest crude oil importer, is facing a double whammy.
The US House of Representatives on Wednesday passed legislation that could enable President Donald Trump to impose sanctions on Russia and up to 100 per cent tariffs on countries that buy Russian oil and gas. It will need Trump’s approval to be made into law.
India and China have been among the largest buyers of Russian oil.

Analysts believe China will keep buying Russian oil because overland pipelines protect its supply compared with maritime supplies, and the benefit of cheaper oil is likely to outweigh the US tariff threats.
Sayeed said the proposed legislation gave Trump the authority to grant waivers on the grounds of national interest. “The bill does not automatically impose a 100 per cent tariff on every country that buys Russian energy.”
Nevertheless, India will have to grapple with the dilemma of buying more expensive crude oil from elsewhere or potentially exposing its exports to substantial US tariffs.
“The immediate effect is therefore heightened policy and commercial uncertainty, not an already operative 100 per cent tariff,” he said.
India’s Ministry of External Affairs issued a statement on Thursday expressing concern about the proposed US legislation.
“India remains firmly committed to ensuring energy security for its 1.4 billion people. It will continue to do so through diversified sourcing and on the basis of evolving market dynamics,” the statement said.
“This issue has been discussed at high levels in recent months with various US interlocutors. Its potential implications for not just the bilateral relationship but also the international energy market have been very clearly articulated by the Indian side.”
Russian oil supplies were not just another commercial option for India but an important diversification source when flows through the Strait of Hormuz and Bab-el-Mandeb were under stress, said Srinivaasan Balakrishnan, director of strategic engagements and partnerships at Indic Researchers Forum.
The loss of Saudi supplies also made other South Asian countries – Pakistan, Sri Lanka and Bangladesh – vulnerable as energy imports affected their limited fiscal space, Sayeed said.
“Countries with weaker currencies, limited foreign-exchange buffers and large fuel subsidy burdens will feel a prolonged period above US$100 per barrel oil price more acutely than richer East Asian economies,” said Uday Chandra, a professor at India’s Ashoka University.


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A passenger boat sails past Indian-flagged oil tanker Kashimasan, docked near an offloading terminal at Butcher Island, off the coast in Mumbai in April. Photo: AFP

Vessels transit the Strait of Hormuz off the coast of the port city of Bandar Abbas in southern Iran on September 5. Photo: AFP

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People attend Gastech Bangkok 2026, in Bangkok, Thailand, on Monday. Photo: Reuters

Mohammad Taufik, CEO of Malaysian state energy giant Petronas, speaks during a session at Gastech Bangkok 2026 on Monday. Photo: Reuters

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People refuel their motorbikes at a gas station in Dhaka on Tuesday. Authorities in Bangladesh have imposed a daily limit on fuel sales to conserve electricity. Photo: AFP

Oil tankers and cargo ships line up in the Strait of Hormuz as seen from Mina Al Fajer, the United Arab Emirates, on Wednesday. Photo: AP

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This Week in Asia

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Experts say the loss will hit Asian refiners first before feeding through to inflation, currencies and economic growth across the region


Experts say the loss will hit Asian refiners first before feeding through to inflation, currencies and economic growth across the region.


Saudi oil pipeline closure puts Asia’s economic resilience to the test

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Experts say the loss will hit Asian refiners first before feeding through to inflation, currencies and economic growth across the region

Experts say the loss will hit Asian refiners first before feeding through to inflation, currencies and economic growth across the region