The conflict is upending lives and livelihoods in the region and beyond, dimming the outlook for many economies, according to research from multiple sources. The shock from the war is global but asymmetric, affecting energy importers, poorer countries, and those with meager buffers more severely. It could lead to higher prices and slower growth globally, with outcomes depending on the conflict's duration, spread, and damage. Energy is the main transmission channel for the war's economic impact, with the de facto closure of the Strait of Hormuz and damage to infrastructure causing a large disruption. The war has also caused serious disruption to the economies of the most directly affected countries, with potential long-lasting damage to infrastructure and industries.
The closure of the Strait of Hormuz represents the largest disruption to the global oil market in its history, as described by the International Energy Agency. About 25 to 30 percent of global oil and 20 percent of liquefied natural gas pass through the strait, with around one fifth of global oil supplies transiting it each day and few alternative export routes available. Most crude oil and oil products leaving the Strait of Hormuz are destined for Asia. A prolonged halt to shipments through this chokepoint would pose a significant risk to global supply, and the exact duration of the closure and criteria for its reopening remain uncertain, as do specific measures by governments or international bodies to reopen it or secure alternative routes.
US and Israeli military strikes on Iran have sent global oil and gas markets spiraling, with oil prices near $100 per barrel. Benchmark US crude prices hover near $95 per barrel, up from prewar levels in the low- to mid-$60/bbl range, though prices have at points soared to close to $120 per barrel due to strikes on shipping and infrastructure and the effective closure of the Strait of Hormuz. International prices for LNG have jumped more than 50 percent, with little direct effect on US consumers. Global oil markets are well integrated, so a disruption in one part of the world leads to a global spike in crude oil prices.
Large energy importers in Asia and Europe are bearing the brunt of higher fuel and input costs due to the war. Economies heavily dependent on oil imports in Africa and Asia are finding it increasingly hard to access supplies, even at inflated prices. Parts of the Middle East, Africa, Asia-Pacific, and Latin America face higher food and fertilizer prices and tighter financial conditions due to the war. Low-income countries are especially at risk of food insecurity and may need more external support.
The blockade has led to a global oil shortage, rocking Gulf-reliant Asian countries hard. The Philippines has mandated four-day work weeks to save fuel, and Indonesia is seeking ways to avoid burning through reserves that will last just weeks. China is the world's largest buyer of oil and is feeling the strain but sits in a better position than its neighbours due to years of statecraft. China uses an estimated 15 to 16 million barrels of oil daily, mainly for transportation, with much of it imported.
China is testing its resilience to a Gulf oil supply shock due to the Iran war's disruption of a key global shipping route. Gulf countries are a major source of oil for China, with Saudi Arabia and Iran accounting for more than 10% of its imports each. China's north is mainly powered by domestically produced oil and pipeline imports from Russia, which are not disrupted by the war. Russian oil accounts for nearly a fifth of China's energy imports, making Moscow its biggest oil supplier despite sanctions. Coal is the dominant source of power for most of China's electricity, and China is the world's largest coal producer, with oil and gas accounting for just over a quarter of its total energy consumption.
The International Energy Agency proposed a collective release of 400 million barrels of oil from emergency reserves on March 10, approved by all member countries on March 11. The Swedish Energy Agency holds significant responsibility for Sweden's emergency reserves of oil and fuel. How global emergency oil reserves are being utilized and coordinated to mitigate supply shortages remains an open question, alongside the specific impacts on global inflation and economic growth projections due to the energy price shocks.
The short-term impact on Swedish and European buyers is expected to be higher prices rather than supply shortages. There is no indication of an immediate risk of physical shortages in Sweden. The status of negotiations or diplomatic efforts to de-escalate the conflict and restore energy shipments is currently unknown.
Deloitte Private and Raffles Family Office jointly launched The Family Office Insights Series—Asia Pacific Edition on September 10, 2024. The Asia Pacific Edition of the Family Office Insights Series covers the top 10 family office trends and maps out the family office landscape in the region. The research surveyed 89 single family offices in Asia Pacific.
Eighty-four percent of Asia Pacific family offices expect an increase in the family's wealth this year. Forty-eight percent of Asia Pacific-based family offices are looking to increase their reliance on outsourcing services, higher than the global average of 34%.
Geopolitics (55%) and inflation (44%) are perceived as two key market risks for Asia Pacific family offices in 2024. Investment risk (72%), geopolitics (44%), and regulatory and tax challenges (28%) are considered the top risks to family offices this year, in line with global peers.
Investment risk management is a top priority (67%) for family offices, followed by investment governance and valuation.
Family offices collectively manage assets estimated at $6 trillion worldwide according to UBS. Geopolitical uncertainty is the leading worry for family offices, shaping their capital allocation decisions. Eighty-four percent of family offices cite the geopolitical landscape as increasingly critical, paired with 64% looking to increase portfolio diversification.
The spectre of US sanctions has led family offices to carefully avoid investments in sensitive sectors, including those linked to strategic technologies. Geopolitical risks include tariffs, sanctions, restrictions on technology transfers, forced divestments, and financial losses due to conflict in sensitive regions.
Clean energy technologies are not immune from supply chain disruptions stemming from geopolitical disputes, such as China's restrictions on critical minerals.
The United States is the world's largest LNG exporter and a major EU supplier, with construction underway to expand export capacity.
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