When the Strait of Hormuz was blockaded on 4 March, the immediate focus was on oil prices and Western economies. But four weeks into the crisis, the most devastating economic consequences are being felt not in New York or London, but in New Delhi, Bangkok, Manila and Seoul.
Asia’s dependence on Gulf energy is a structural vulnerability that has been understood for decades but never addressed. The region imports the majority of its oil and gas from the Persian Gulf. When that supply was suddenly choked off, the effects were immediate and brutal. Brent crude has risen roughly 45% since late February. Gas prices are up 55%. And the currencies of the region’s most energy-dependent economies are in freefall.
The Currency Cascade
India’s rupee has depreciated sharply against the dollar as the country’s import bill balloons. Thailand’s baht, already under pressure from a tourism slowdown, has tumbled further. The Philippine peso hit a record low of 60.1 per dollar on 19 March. South Korea’s finance ministry has activated its currency crisis response team for the first time since the pandemic — a move that speaks volumes about the severity of the situation.
These are not marginal fluctuations. Currency depreciation in energy-importing nations creates a vicious cycle: a weaker currency makes oil imports more expensive, which worsens the trade balance, which puts further pressure on the currency. Breaking the cycle requires either a sharp drop in energy prices — unlikely while the war continues — or aggressive central bank intervention that risks choking off growth.
Inflation Returns
The inflation numbers are starting to come through, and they are ugly. Regional inflation is forecast to hit 4.6% in 2026, up from 3.5% in 2025. For countries that spent the past two years carefully engineering a soft landing from the post-pandemic price surge, this is a devastating setback. Central banks that were preparing to cut rates are now being forced to consider hikes instead.
The European Central Bank is expected to raise rates as soon as next month, according to money market pricing. The Bank of England has shifted to a hawkish stance. Even the Bank of Japan, which has spent decades fighting deflation, is no longer ruling out a rate increase. The global monetary policy environment has flipped in the space of four weeks from cautious easing to emergency tightening.
Beyond Oil
The economic damage extends well beyond energy. The Persian Gulf is a critical hub for fertiliser production. Disruptions to supply are already feeding through to agricultural input costs across Asia, threatening food price inflation in countries where millions of people spend the majority of their income on food. The chemical sector has been hit. Semiconductor supply chains, which depend on specialised chemicals produced in the Gulf region, are reporting delays.
The comparison that analysts are reaching for is the 2020 pandemic — not in terms of the cause, but in terms of the cascading economic disruption. Supply chains that were painstakingly rebuilt after COVID are being severed again. Trade routes that had only just normalised are being rerouted. And the bill, as always, is being paid by the countries least able to afford it.
The Iran war was sold to the American public as a targeted operation to neutralise a nuclear threat. What it has become is a wrecking ball swinging through the global economy, with Asia directly in its path. The question nobody in Washington seems to be asking is who picks up the pieces when the swinging stops.