Brent crude closed at $103.14 per barrel on Friday, its highest settlement since 2022, as the Strait of Hormuz remained effectively shut to commercial shipping for a fourth consecutive week. The oil price trajectory has accelerated in the final days of March, driven by Iran’s March 18 strike on Qatar’s Ras Laffan LNG complex, which reduced the country’s liquefied natural gas production capacity by an estimated 17%, and by the failure of diplomatic efforts to produce a ceasefire or a framework for reopening the strait.
The impact on Asian equity markets has been severe and broadening. Foreign investors withdrew a record volume of capital from Indian equities in March, as rising oil prices threatened to widen India’s current account deficit and force the Reserve Bank of India to reconsider its monetary easing cycle. The KOSPI has retreated from its January highs, weighed down by South Korea’s heavy dependence on imported energy and the risk that rising production costs could compress margins even in the semiconductor sector. Japan’s Nikkei 225 has given back a portion of its post-election gains as the energy shock complicates the fiscal expansion narrative that had underpinned the rally.
South Korea has announced some of the most aggressive measures in the region. Seoul activated a 100 trillion won market stabilization program, imposed a five-month restriction on naphtha exports, and is considering implementing an oil price cap for the first time in nearly 30 years. Industry Minister Kim Jung-kwan traveled to Washington to discuss tariff arrangements and energy cooperation with Commerce Secretary Howard Lutnick. The government has signaled willingness to use all available policy tools to manage the economic fallout, but the structural reality is that South Korea routes more than 95% of its Middle Eastern crude through Hormuz, and no combination of policy interventions can fully substitute for the loss of that supply corridor.
The IEA’s coordinated release of 400 million barrels from strategic reserves across member nations has provided a temporary buffer, but analysts have cautioned that this volume covers only approximately 20 days of typical Hormuz flows. Strategic reserves are a finite resource, and their depletion timeline has become a focal point for energy market analysts assessing the duration risk of the conflict. The U.S. Strategic Petroleum Reserve held 415.4 million barrels as of mid-February, and its maximum drawdown rate of 4.4 million barrels per day means that even America’s stockpile would be exhausted within months if drawn down aggressively.
The downstream consequences are cascading through the real economy. Aviation fuel costs have spiked, with Shell CEO Wael Sawan warning that fuel shortages will spread globally, beginning with jet fuel, followed by diesel, and finally gasoline. Fertilizer prices have risen sharply, threatening agricultural production cycles in Asia and Latin America. Pakistan has asked citizens to watch cricket from home to conserve fuel. Vietnam has experienced flight cancellations, Australia has reported fuel shortfalls at hundreds of gas stations, and several Asian nations have begun restricting petroleum exports to preserve domestic supply.
The geopolitical trajectory remains uncertain. President Trump’s March 19 summit with Takaichi addressed energy cooperation between the United States and Japan, but the broader conflict dynamics have not resolved. Trump has threatened further escalation against Iranian military and energy infrastructure, including Kharg Island, Iran’s primary crude export terminal. Iran has warned of retaliatory strikes on regional energy facilities if its own infrastructure is targeted. The IRGC declared the strait closed, and while some limited traffic, primarily Iranian and Chinese-flagged vessels, has continued through an alternative channel north of Larak Island, the waterway remains functionally impaired for global commerce.
For investors, the March quarter is closing with a dramatically different risk profile than it began. The AI-driven semiconductor rally, the Takaichi fiscal expansion trade, and the structural growth narratives for India and Southeast Asia all remain intact as medium-term investment themes, but each is now competing with an energy shock that threatens to reshape near-term growth expectations, central bank policy trajectories, and corporate earnings forecasts across the region. Portfolio managers face a familiar but intensified version of the challenge that has defined Asian investing in recent years: strong structural fundamentals overlaid with acute geopolitical risk. The Hormuz crisis is the latest and most consequential manifestation of that tension.
