Introducing

Tian Yong Woon

Tian Yong joined Haver Analytics as an Economist in 2023. Previously, Tian Yong worked as an Economist with Deutsche Bank, covering Emerging Asian economies while also writing on thematic issues within the broader Asia region. Prior to his work with Deutsche Bank, he worked as an Economic Analyst with the International Monetary Fund, where he contributed to Article IV consultations with Singapore and Malaysia, and to the regular surveillance of financial stability issues in the Asia Pacific region.

Tian Yong holds a Master of Science in Quantitative Finance from the Singapore Management University, a Master of Science in Analytics from the Georgia Institute of Technology, a Bachelor of Science in Mathematics from the Singapore University of Social Sciences, and a Bachelor of Science in Banking and Finance from the University of London.

Publications by Tian Yong Woon

Asia| Jun 02 2026
Economic Letter from Asia: Two Halves, Emerging Risks
In this week’s Letter, we examine a tale of two halves between China and India, highlighting the contrasting relationship between economic fundamentals and currency performance in Asia’s two largest emerging economies. In China, a recent run of softer economic data has pointed to slowing growth (chart 1), yet the Chinese yuan has remained one of the region’s strongest-performing currencies this year (chart 2). India presents the opposite picture: economic growth prospects remain among the brightest in Asia, but the Indian rupee has continued to face downward pressure amid persistent foreign investor outflows and a marked decline in central bank foreign exchange reserves (chart 3).

Beyond China and India, the broader region is also confronting emerging inflation risks. In addition to elevated energy prices stemming from the closure of the Strait of Hormuz, concerns are growing over the potential development of a “Super El Niño” event, which could weaken agricultural output and add further inflationary pressure through the food channel (chart 4). At the same time, the battle between inflation concerns and AI-driven optimism continues to shape market sentiment. Equity markets in major AI beneficiaries such as Taiwan and South Korea have seen their market capitalisations surpass those of several larger developed markets, including Germany (chart 5).

Moreover, the benefits of the current AI investment cycle are not confined to the region’s technology leaders. Economies such as Thailand are also seeing positive spillovers from the current AI investment cycle. In particular, Thailand has recorded a surge in FDI linked to investments in digital infrastructure and AI-related industries (chart 6). Countries across the region are increasingly positioning themselves to participate in the ongoing buildout phase.

China China’s unofficial manufacturing PMI was released earlier in the week, showing a pullback to 51.8 in May (chart 1), though it remained in expansionary territory. The decline mirrors the weakness seen in the official PMI readings and was accompanied by a sharp drop in new export orders, which fell into contractionary territory for the first time in months. These developments come amid a run of disappointing economic data from China, with growth slowing even in the export-oriented industrial sector, generally regarded as a stronger driver of activity than more domestically focused sectors. This perhaps suggests that while China may be relatively insulated from the effects of the Strait of Hormuz closure compared with other Asian economies, such insulation is not complete, and some adverse spillovers are nonetheless becoming apparent.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 26 2026
Economic Letter from Asia: Fiscal Strains
In this week’s Letter, we examine the ongoing Middle East situation through another lens — namely, the fiscal costs it has imposed on Asian economies and the strains that are already beginning to emerge. While the recent surge in bond yields has largely been attributed to inflation-related concerns, yield spikes in some Asian economies have also arguably been driven by fiscal concerns, as governments step up bond issuance to finance support measures (chart 1).

In India, cracks are beginning to show in its fuel subsidy programme, with fuel prices now being raised as previously subsidised rates appear increasingly unsustainable, underscoring the inherently finite nature of such measures (chart 2). While Indonesia continues to hold the line by keeping Pertalite fuel prices unchanged, hikes in more premium fuel grades, coupled with the government’s broader slate of spending initiatives, have left investors increasingly on edge over the country’s fiscal sustainability (chart 3). In Japan, the cabinet is reportedly seeking to put together an additional budget to help cushion inflationary pressures stemming from the Middle East conflict. Although the Prime Minister has sought to allay concerns over additional bond issuance, broader fiscal concerns remain (chart 4).

Against this backdrop of fiscal strain , inflation risks, and geopolitical instability, it is also important to keep in mind the growth-supportive factors still in place across parts of Asia. In particular, the ongoing AI upcycle continues to support exports in several regional economies (chart 5). Taking these crosscurrents into account, we then turn to the week ahead, where central banks will continue to navigate the trade-off between growth and inflation amid a heavy slate of upcoming data releases, particularly across East Asia (chart 6).

Bond markets Global yields have remained elevated, although some pullback has been seen in recent days (chart 1). Inflation-related concerns arising from elevated oil prices linked to the Middle East conflict remain front and centre and are still widely cited as the main driver of the recent spike in nominal yields. However, other factors are also at play, particularly in certain economies. Contributing to the rise in yields in some economies are fiscal concerns. Regarding the US-Iran situation, hopes for a peace deal have once again been raised in recent days, only to be subsequently dampened, underscoring how little concrete progress has ultimately been made. In addition, fresh US strikes on Iranian missile launch sites and boats highlight the continued fragility of the situation. On balance, the world remains stuck in a state of limbo, holding its breath for a positive peace outcome — particularly the reopening of the Strait of Hormuz — while the economic effects of its closure continue to weigh on the global economy.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 18 2026
Economic Letter from Asia: After the Summit
In this week’s Letter, we review the key outcomes from last week’s US–China summit, which, while largely symbolic as a reset in bilateral relations, also yielded several notable trade-related agreements (chart 1). We also examine China’s latest monthly data releases, which extended last month’s moderation in growth and further highlighted the increasingly two-speed nature of its economy (chart 2). Turning to Japan, we look ahead to this week’s key data releases. Q1 GDP growth appears likely to be supported by resilient exports, while the domestic picture—reflected in indicators such as household spending—continues to lag (chart 3). On the inflation front, upcoming CPI readings will be closely watched; if price pressures accelerate further alongside continued yen weakness, this could revive a policy dilemma for the Bank of Japan (chart 4). Zooming out, inflation appears to have reasserted itself as the dominant market driver, with nominal yields rising across markets (chart 5). At the same time, AI-related optimism has taken a back seat for now, as equity markets pull back from recent rallies (chart 6).

The US-China summit The highly anticipated US–China summit concluded last week, with few details released immediately afterward. More information emerged early this week, as the White House outlined several key developments. Perhaps most importantly, though largely symbolic at this stage, the two sides agreed to build a “constructive relationship of strategic stability.” While the phrase does not imply any concrete policy actions, it may signal a shift away from the repeated tensions and frictions that have characterized recent interactions. The US and China also agreed that the Strait of Hormuz should be reopened, although no specific measures were announced to achieve this. On more tangible outcomes, the White House said China approved an initial purchase of 200 Boeing aircraft for Chinese airlines and committed to buying at least $17 billion of US agricultural products annually from 2026 to 2028. China also restored market access for US beef by renewing expired registrations for more than 400 US beef facilities and adding new listings, while resuming imports of US poultry.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 11 2026
Economic Letter from Asia: Of Bits and Barrels
In this week’s Letter, we track the dual drivers of AI optimism and the ongoing Middle East conflict, and how they continue to shape market prices and investor expectations. AI-related enthusiasm has remained a key support for equity markets, particularly in highly exposed indexes in Taiwan and South Korea, while continued oil supply bottlenecks stemming from the closure of the Strait of Hormuz have kept crude prices elevated (chart 1). These dual forces are also evident in the latest Blue Chip Economic Indicators survey. Year to date, all Asian economies have seen upward revisions to inflation forecasts, while the most AI-exposed advanced Asian economy, Taiwan, has recorded a particularly large upgrade to real GDP growth expectations (chart 2). Looking more closely at the monetary policy implications of higher oil prices, this month’s survey shows an increasing share of panellists expecting central banks to resume or extend tightening cycles, marking a modest shift from last month’s results (chart 3). This shift is already partially reflected in recent data, with average inflation across Asia edging higher and several central banks already opting to tighten policy in response (chart 4).

Looking ahead, attention will likely centre on the Trump–Xi summit taking place in Beijing later this week. While any potential for additional Chinese mediation efforts regarding the Middle East conflict will be closely watched, developments on the US–China trade front should not be overlooked given the range of unresolved issues (chart 5). Finally, despite recent headline focus on the Middle East, China has continued to post steady export growth, while also managing to temper excessive domestic producer competition. Together, this has supported a combination of firmer external demand and more stable pricing dynamics—an “all-win” outcome for now (chart 6).

AI vs. the Middle East conflict The divergence between AI-driven equity market optimism and the persistence of elevated crude oil prices amid the ongoing Middle East conflict remains striking. On the one hand, equity markets—particularly in AI-heavy economies such as Taiwan and South Korea (chart 1)—have largely shrugged off concerns over energy supply disruptions. Investors remain focused on the upside potential from the current AI buildout cycle, driven by the rising computational demands of increasingly capable AI models. More recently, attention has shifted toward the scalability and broader applications of physical AI, including humanoid robots, and their potential implications for manufacturing, healthcare, and even household use. On the other hand, crude oil prices remain well above pre-conflict levels. The latest development is the US rejection of Iran’s most recent peace proposal, underscoring that a swift resolution to the US-Iran conflict remains unlikely.
by:Tian Yong Woon
|in:Economy in Brief
Asia| May 05 2026
Economic Letter from Asia: Everybody’s Changing
In this week’s Letter, we take another pulse on recent key developments relating to, and affecting, Asia. The week has once again begun on a hopeful note, following reports that the US will guide neutral vessels through the Strait of Hormuz, signalling a partial easing of trade flows through the waterway. Asian markets, including South Korea and Taiwan, were further buoyed by persistent AI-related optimism (chart 1). A full tally of central bank decisions since February highlights a growing divergence across the region. While most central banks have opted to hold back on tightening, a subset has already moved to raise policy rates in response to inflation pressures stemming from higher oil prices (chart 2). A cross-country comparison of consumer inflation reinforces this divergence, with more pronounced CPI increases in economies such as Australia and the Philippines, where central banks have recently hiked rates (chart 3).

In the meantime, amid the absence of oil flows through the Strait, many Asian importers have begun sourcing supplies from alternative producers, including the United States (chart 4). At the same time, major oil exporters affected by disruptions in the Strait of Hormuz have been forced to scale back crude production significantly due to storage constraints (chart 5). Looking ahead, attention turns to a three-pronged week featuring regional PMIs, additional central bank decisions (chart 6), and further Q1 GDP releases.

Early-week optimism Asian markets began the week on an optimistic footing, supported by developments in the Middle East. Reports that the US will guide neutral vessels through the Strait of Hormuz have lifted expectations of a partial resumption in trade flows through what has been a severely constrained passage. That said, while any reopening of oil and broader shipping routes is a key factor in easing the supply shock stemming from the conflict, the situation remains far from resolved. Uncertainty persists over both the scale and durability of any recovery in shipping activity. Elevated tensions between the US and Iran—underscored by exchanges of fire as US forces escorted vessels through the waterway on Monday—continue to leave the outlook vulnerable to renewed disruption. Nonetheless, ongoing AI-related optimism has continued to underpin equity markets. Asia stands to benefit disproportionately given its central role in the global AI supply chain, helping keep equity prices elevated across key markets such as South Korea and Taiwan (chart 1).
by:Tian Yong Woon
|in:Economy in Brief
Asia| Apr 27 2026
Economic Letter from Asia: Not Just About the Strait
In this week’s Letter, we cover the latest developments and implications of the Middle East conflict for Asia, while also making space for other important themes, including artificial intelligence (AI). The Middle East conflict remains in a no deal state coming out of the weekend, though some early Monday optimism emerged in Asian markets following Iran’s reported offer to reopen the Strait of Hormuz (chart 1). Nonetheless, as the Strait closure drags on, so too do the fiscal costs of domestic fossil fuel subsidies across Asia, which have been shown to move closely with crude oil prices (chart 2). While such measures offer direct relief by cushioning household energy costs, they remain difficult to sustain over the long haul.

Over the week, we also saw a further fraying in regional monetary policy trends, with the Philippines hiking its policy rate for the first time in about two years amid inflation concerns, while Indonesia stood pat on rates (chart 3). Investor attention is likely to remain fixed on monetary policy this week, with the Bank of Japan due to decide on policy. Expectations for an April hike have faded amid the persistent Middle East conflict, though yen weakness continues to present a source of concern (chart 4). The week also brings China’s latest PMI readings (chart 5), adding to the recent run of hard data accompanying the Q1 GDP release.

Beyond the Middle East conflict, the evolution of AI continues to demand close attention. Before geopolitical tensions took centre stage, AI was the dominant market narrative — and that enthusiasm has hardly faded. If anything, recent developments suggest the story is broadening: use cases are expanding, scalability is improving, and access is widening beyond large corporates to the mass market — increasingly spilling into the realm of physical AI. It may well be this persistent wave of optimism that is helping to underpin equity valuations, even as the geopolitical backdrop darkens (chart 6).

The Middle East conflict About two months in, we remain stuck in the limbo of the US-Iran conflict, which has left the Strait of Hormuz largely closed and much of the world starved of the critical oil flows needed to power the global economy. The back and forth between the US and Iran has persisted in recent weeks, with both sides again failing to reach a peace deal over the weekend, though Monday’s news of Iran offering to reopen the Strait has revived some hope in markets. In truth, commodity and market valuations do not hinge so much on a peace deal itself, but rather on the resumption of oil flows through the Strait, something that could materialise even in the absence of a formal deal, though any agreement that includes and credibly delivers such a reopening would likely be warmly received by markets. Until then, market gyrations are likely to persist, with prices fluctuating in response to each new snippet of news. And until then, the world will continue both to be starved of, while gradually adapting to, the drip feed of oil flows emerging from the Strait.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Apr 20 2026
Economic Letter from Asia: Barrel of Doubt
In this week’s Letter, we take stock of the latest economic data from China, assessing what it tells us about the outlook for growth and policy. We also continue our coverage of the Middle East conflict, focusing on its broader implications for Asia through energy markets, trade routes, and regional risk sentiment.On China, while Q1 GDP data exceeded expectations, putting the economy on a firm footing to meet its annual growth target (chart 1), a closer look at the underlying monthly indicators suggests the headline resilience may be masking a more uneven underlying picture (chart 2).

As for the Middle East, the latest round of regional March CPI prints largely confirms the initial pass-through from higher oil prices to consumer inflation. If energy prices remain elevated, second-round effects will likely become more evident in the coming months (chart 3). Turning to the Strait of Hormuz, shipping data point to a gradual recovery in flows. However, conflicting signals on the strait’s status—alongside renewed US–Iran tensions—continue to cloud the outlook for a sustained normalization in global oil supply (chart 4). In response, global players have begun to adapt, including rerouting shipments via the longer but safer Cape of Good Hope route, and exploring alternative export channels through Red Sea ports, even though these remain exposed to regional risks (chart 5). Finally, the conflict has prompted a reassessment of the global outlook. In its latest World Economic Outlook, the IMF delivered broad-based growth downgrades across economies, with only a handful of exceptions (chart 6).

China China released a raft of data late last week, with March figures particularly pertinent as they capture the initial effects of the Middle East conflict that erupted in late February. Notably, Q1 GDP exceeded expectations, with the economy expanding 5% y/y despite incorporating March data (chart 1). This suggests China has secured a firm early footing toward its 4.5%–5% growth target for the year—a slight step down from last year’s “about 5%” goal. But a closer look at the March data reveals several nuances. On the external front, export growth slowed sharply year-to-date, falling behind import growth, thereby dragging on trade balance growth.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Apr 13 2026
Economic Letter from Asia: A Shifting Consensus
In this week’s Letter, we continue to track developments in the Middle East and their implications for Asia. While the recent US–Iran ceasefire initially provided some relief to markets, subsequent complications have kept uncertainty elevated, with no conclusive resumption of trade flows yet through the Strait of Hormuz (chart 1)—flows that are critical to restoring the global energy system to more normal conditions.

Overall, our Blue Chip Economic Indicators panellists have broadly downgraded growth expectations for Asia this year, with the exceptions of China and Taiwan, while inflation forecasts have been revised higher across the board (chart 2). That said, the growth and inflation impact from the conflict are largely viewed as transitory, with most panellists expecting them to last between six and twelve months (chart 3). Nonetheless, central banks in the region appear increasingly reluctant to ease policy further. This is evident in the latest round of decisions, where India, South Korea, and New Zealand all held policy rates steady (chart 4), citing heightened uncertainty stemming from the ongoing conflict.

While inflationary pressures are beginning to build more broadly across the region, China had already been experiencing a pickup in recent months (chart 5). This has been supported by easing producer price deflation and improving industrial profits, alongside policy efforts to curb excessive price competition among producers. Attention now turns to China’s upcoming Q1 GDP release and the full slate of monthly data due later this week (chart 6).

Middle east conflict developments Crude oil prices fell sharply earlier last week following news of a temporary US–Iran ceasefire. That said, the geopolitical backdrop remains highly fragile, as reflected in continued rhetoric from both sides, alongside the US announcement of a naval blockade over the strait after talks failed to yield an agreement. Compounding this, Iran has indicated that it cannot fully reopen the strait, citing uncertainty over the location of sea mines it had previously laid—further complicating any swift normalization of oil flows. Even prior to these latest developments, IMF-tracked shipping volumes had only begun to show tentative signs of recovery and remain well below pre-escalation levels. As such, while the ceasefire provides a welcome reprieve, meaningful economic relief will hinge on a sustained restoration of oil flows—crucially without additional frictions or costs that could impair global trade. Until then, crude prices are likely to remain elevated, albeit possibly off recent highs, weighing on growth while sustaining inflationary pressures. In Asia, where many economies are heavily reliant on oil imports, the region is likely to bear a disproportionate share of these effects.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Apr 06 2026
Economic Letter from Asia: First-Round Effects
In this week’s Letter, we examine the first-round price impacts of the surge in oil prices stemming from the ongoing Middle East conflict in Asia. Despite recent rhetoric and reports suggesting a potentially swift resolution, the conflict continues to unfold, with a ceasefire hanging in the balance, and with some measures of shipping volumes through the Strait of Hormuz still reduced to a trickle. At the same time, crude oil prices have been whipsawing amid shifting market perceptions about the persistence of the current supply shock (chart 1). The initial effects of higher oil prices are already showing up in hard data, particularly in energy- and fuel-related inflation across Indonesia, South Korea, and Vietnam (chart 2). In response, several governments have rolled out sizeable subsidy programmes to cushion rising energy costs, though these measures come with significant fiscal strain.

We also assess recent consumer inflation expectations in South Korea and Taiwan, which show early signs of edging higher (chart 3), although there is as yet no clear evidence of a meaningful unanchoring. To add further nuance, our latest Blue Chip survey suggests that most panellists expect only a limited and temporary pass-through from higher energy prices to core inflation, though a non-trivial minority anticipate a more persistent effect (chart 4). On the policy front, respondents broadly expect central banks to delay easing while avoiding outright tightening, with outcomes likely to diverge across regions (chart 5). In the near term, upcoming policy decisions in India, New Zealand, and South Korea—alongside other key data releases—will provide a useful test of these expectations (chart 6).

The Middle East conflict The Middle East conflict continues to rage, with IMF-tracked shipping volumes through the Strait of Hormuz still reduced to a trickle. Meanwhile, crude oil prices remain volatile, gyrating alongside shifting perceptions over how soon normal oil flows might resume. In reality, there is still little sign of a substantive resolution, and no agreement to fully reopen the strait appears imminent, suggesting that oil flows are likely to remain constrained at low levels in the near term. That said, some investors are closely monitoring developments following reports of discussions around a potential 45-day ceasefire, which could pave the way toward a more lasting resolution. Until then, and absent any meaningful supply relief, crude oil prices—and by extension, energy-related inflation—are likely to face continued upward pressure, particularly for oil-dependent, importing economies.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Mar 30 2026
Economic Letter from Asia: Consumer Watch
In this week’s Letter, we focus on the Asian consumer against the backdrop of recent global developments, alongside longer-running structural trends and economy-specific nuances. At a broad level, demographic headwinds are becoming more binding: as economies mature, population growth is slowing and ageing is accelerating, weighing on the expansion of the consumer base. At the same time, several economies are attempting to pivot toward more consumption-driven growth to help offset these forces (chart 1). More recently, while electoral outcomes in some countries have provided a boost to consumer sentiment, the renewed flare-up in the Middle East poses a near-term risk. Higher oil and energy prices threaten to squeeze household purchasing power, potentially weighing on sentiment and spending.

In China, policy efforts to raise the consumption share of GDP have delivered some early gains, reflected in firmer consumer sentiment and retail sales (chart 2). However, the impact of these measures may prove transitory if deeper structural constraints are not addressed. Encouragingly, authorities are increasingly looking to services as a new driver of consumption, given its relative underdevelopment compared to goods and manufacturing, and its potential for more sustained growth (chart 3). In Japan, post-election optimism surrounding Prime Minister Takaichi’s pro-growth agenda—including a proposed removal of the 8% consumption tax—has supported sentiment. However, rising oil prices risk reintroducing inflationary pressures, which could erode real wage gains and weigh on spending (chart 4).

In South Korea, early signs of such pressures are already emerging (chart 5). Attention is also turning to consumer expectations, particularly around housing prices following recent cooling measures, as well as inflation expectations—especially if they begin to show signs of becoming unanchored. In Thailand, post-election optimism has similarly supported sentiment and consumption (chart 6). Nonetheless, headwinds persist, notably elevated household debt and higher oil prices. While the agreement between Thailand and Iran to allow vessels to transit the Strait of Hormuz is a positive development, it remains uncertain how much relief it will ultimately provide.

The Asian consumer Asia is at a crossroads. On the one hand, as is typical for maturing economies, the region is confronting slowing population growth and rapid ageing. This implies a more slowly expanding—and in some cases shrinking—consumer base, as already evident in economies such as China and Japan. At the same time, consumption patterns are shifting toward goods and services tied to ageing and retirement, as older cohorts account for a larger share of demand. On the other hand, Asia’s household consumption share of GDP has edged higher in recent years. Much of the remaining upside—relative to global averages—is concentrated in a handful of economies, most notably China, which we discuss later. A more decisive rebalancing toward consumption could unlock additional spending power across the region, partly offsetting demographic headwinds, though the net impact remains uncertain.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Mar 23 2026
Economic Letter from Asia: A Crude Awakening
In this week’s Letter, we take stock of the ongoing Iran conflict, review key developments across Asia, and assess consumer sentiment in the region. The conflict continues to weigh on markets, with oil prices remaining elevated (chart 1). At the same time, global pressure is building against the continued disruption of flows through the Strait of Hormuz, though concrete actions to restore shipments remain uncertain.

Amid this backdrop, several Asian central banks delivered policy decisions last week (chart 2), with the Middle East conflict explicitly cited as a key consideration. In effect, higher oil prices have either reinforced existing tightening biases or reduced the likelihood of rate cuts, reflecting mounting inflation concerns. On the domestic front, Thailand stood out, where Prime Minister Anutin’s decisive parliamentary re-election has eased lingering political uncertainty. Attention now shifts to how the new government will address longstanding challenges, particularly elevated debt levels (chart 3), alongside broader economic reforms. Looking ahead, the regional calendar remains active. Beyond flash PMI releases, focus will turn to Japan’s latest inflation print (chart 4) and China’s industrial profit data.

Turning to the Asian consumer, sentiment in China and Japan has improved in recent months (chart 5), supported in part by government policy and expectations of further consumer-focused measures. However, the Iran conflict poses downside risks, particularly through higher energy prices. Elsewhere in Asia, consumer confidence has stabilised (chart 6), though it remains exposed to similar risks, with the ongoing conflict threatening to weigh on sentiment across the region.

Iran conflict and energy prices The Iran conflict continues to rage, with shipping through the critical Strait of Hormuz still heavily constrained. This has kept a tight lid on crude supply, leaving oil prices significantly elevated (chart 1) relative to recent history. The resulting supply drag and price surge are adding upward pressure on inflation and, potentially, weighing on growth—particularly for oil-importing economies across Asia. That said, momentum is building on the diplomatic front. More than 20 countries have now backed a joint statement calling for safe navigation through the strait. Still, it remains unclear how this will translate into concrete actions, or—crucially from an economic perspective—how quickly it might restore disrupted oil flows.
by:Tian Yong Woon
|in:Economy in Brief
Asia| Mar 16 2026
Economic Letter from Asia: Strait Squeeze
In our Letter this week, we examine the ongoing Iran war through an Asian lens. Geopolitical uncertainty and crude oil prices have remained elevated (chart 1), despite early reports concerning the potential for a brief conflict that tempered investor caution. Attention has now centred on the Strait of Hormuz, through which a significant share of global oil typically flows. With shipments now nearly halted (chart 2), much of the world’s energy flow has effectively stalled. While these developments have broad global implications, their impact on Asian economies is more nuanced. This partly reflects differences in energy mixes across the region (chart 3), as well as the historical relationship between oil prices and energy inflation (chart 4). Further compounding the challenges faced by Asian oil importers are currency effects: a broader risk-off turn in markets has weighed on several Asian currencies (chart 5), raising the local-currency cost of energy imports. Amid these pressures, several regional central banks are also set to decide on policy this week (chart 6), alongside major Western counterparts such as the Federal Reserve. Near-term rate cut expectations have been pushed back in many cases amid renewed inflation concerns, while in some Asian economies markets are even pricing in the possibility of further rate hikes.

The Iran war Two weeks in, the Iran war continues with no clear end in sight. Crude oil prices and geopolitical risk therefore remain elevated, as shown in chart 1, despite earlier news that had briefly tempered investors’ heightened caution. Even reports that the 32 members of the International Energy Agency are set to release around 400 million barrels in emergency reserves have done little to curb the surge in crude prices. Latest reports indicate that reserves for Asia will be released immediately, while supplies for Europe and the Americas will only become available from the end of March. Meanwhile, uncertainty surrounding the Strait of Hormuz continues to underpin elevated prices. The strait—currently blocked by Iran—handles roughly 20% of global oil flows. Iran has recently indicated that it may allow ships from certain countries to transit the waterway, though the situation remains fluid.
by:Tian Yong Woon
|in:Economy in Brief