Asia’s oil dependence leaves it exposed after US-Israel strikes on Iran: Morgan Stanley

Morgan Stanley has issued a stark warning that Asia's deep dependence on imported energy exposes the region to severe economic fallout from the escalating conflict between the US-Israel alliance and Iran. In a research note published Sunday, analysts led by chief Asia economist Chetan Ahya highlighted that Asia's oil and gas trade deficit stands at 2.1% of GDP, making its manufacturing-intensive, export-reliant economies "more sensitive" to oil price volatility than Europe or the US. The military campaign, which began Saturday amid nuclear negotiations, has triggered Iranian retaliation against US assets in the Gulf, raising immediate concerns about global energy supply disruptions and sending Asian markets lower on Monday.

The bank's analysis provides a concrete metric for the risk: every sustained $10 per-barrel increase in oil prices would directly reduce Asia's GDP growth by 20 to 30 basis points (0.2 to 0.3 percentage points). Morgan Stanley stresses that ongoing geopolitical tensions, if sustained, will significantly increase downside risks to Asia's macro outlook, as supply-side-driven oil price spikes will simultaneously weigh on growth and elevate macro stability risks. While mainland China imports vast quantities of Middle Eastern oil, the note suggests countries like India and South Korea could fare even worse. The warning underscores how regional conflicts far from Asia's shores can directly threaten its economic engine, forcing investors and policymakers to recalibrate risk assessments for the world's most dynamic growth region.