The initial market reaction to US and Israeli military strikes on Iran was familiar: Brent crude surged in early Asian trading, equity markets slipped and headlines focused on the energy shock to come.

But months later, the conflict appeared to become much more than an energy disruption — it served as a stress test for Asia’s trade architecture, exposing vulnerabilities that run far deeper than elevated oil prices alone.

For corporates, logistics providers and policymakers across the Association of Southeast Asian Nations (ASEAN), the seemingly more consequential story unfolded in shipping lanes, compliance departments, export control registers and trade finance desks.

How the region responds could influence not just its near-term economic outlook, but the structure of Asian trade for years to come.

When Hormuz closes, Asia is among the first affected

The closure of the Strait of Hormuz — through which roughly a third of global seaborne crude oil and around 20% of global liquefied natural gas shipments pass — had near-term consequences for Asia’s most commodity-dependent economies.

Japan, South Korea, Taiwan, Singapore and Hong Kong all import more than 80% of their domestic energy needs. Nearly 90% of liquefied natural gas (LNG) exported through the Strait flows to Asian buyers. Asia generates two-thirds of global GDP growth and accounts for 40% of world trade while remaining heavily dependent on imported energy.

The disruption extended well beyond energy. A third of global seaborne fertilizer trade passes through the Strait of Hormuz, meaning that as gas prices rise, fertilizer costs follow and food prices with them. Some Asian exports have also faced delays or rerouting. India’s agricultural exports to Gulf markets have reportedly slowed as freight and insurance costs spike.

In addition, Qatar is the world’s second-largest producer of helium — a critical input for semiconductor manufacturing — and reports of disruptions at LNG facilities have raised the risk of interruptions in helium production.

A prolonged disruption could have tightened global helium supply and raised costs for the semiconductor industries of Taiwan, South Korea and Japan, adding a technology-supply-chain vulnerability for a region that anchors global electronics output.

Singapore: exposed hub, strategic position

Like its Asian counterparts, Singapore felt the strain from the disruption caused by the conflict. About 95% of the country’s electricity is generated from imported natural gas, and more than 40% of its LNG supply came from Qatar last year.

Singapore’s Energy Market Authority had warned that fuel prices will likely remain elevated in the foreseeable future. Business and market sentiment have declined, with companies across manufacturing, services, transportation and construction pulling back on investment and expansion decisions. Inflation pressures are building, raising the prospect of a tighter monetary policy response.

As one of the world’s leading trade, shipping, commodities finance and bunkering hubs, Singapore sits at the operational center of several supply chains currently under pressure. Its energy and chemicals sector is the country’s second-largest manufacturing industry.

Singapore’s financial institutions provide trade finance, commodity hedging and logistics credit to counterparties across Asia and the Gulf. As a result, disruptions affecting the Strait can be transmitted through Singapore’s logistics and financial ecosystem, with pressures likely to increase if the conflict persists.

Pivot away from Gulf dependency

For manufacturing-intensive economies in Asia, the conflict may accelerate a strategic recalibration that, in some cases, was already underway.

Some governments with large industrial bases — South Korea being a prominent example — have begun to explore alternative energy sources in response to Gulf supply disruptions.

As part of a longer-term strategy, this may create additional impetus to diversify reliance on a single source of energy amid heightened volatility. The environment may also contribute to a rise in demand for defense equipment and heightened security investment among regional governments, particularly those with close security ties to Washington, as evolving risks to US-linked assets and facilities sharpen threat calculations.

The policy responses emerging across the region illustrate the scale of the adjustment now underway. South Korea has imposed its first fuel price cap in nearly three decades. Japan has begun releasing oil from national reserves. Taiwan has spent over $600 million securing spot LNG cargoes.

Meanwhile, governments from Thailand to Indonesia are introducing fuel subsidies, price caps and demand management measures to cushion their populations from the shock. For many Asian economies, a medium-term priority may be to accelerate diversification across energy sourcing, trade routes and supplier relationships.

A shifting compliance landscape

Beyond the immediate risk to oil and gas supplies from the Gulf, one broader concern is how the conflict may influence trade behavior across Asia. As military actions intensify, countries may, in some cases, align their trade and export control policies more explicitly with geopolitical positioning.

The implications are significant. Exporters and logistics providers across ASEAN could face a tightening environment for dual-use goods controls, as governments respond to heightened secondary sanctions risk.

Customs scrutiny could intensify. Informal boycotts and selective export restrictions — driven not by formal policy but by geopolitical signaling — could disrupt established trade relationships.

Financial institutions may encounter growing pressure around counterparty transparency, including more rigorous requirements to identify and verify ultimate beneficial ownership across complex supply chains.

Over time, these non-tariff barriers could, for some sectors, prove as disruptive to regional supply chains as any physical interruption to the supply of oil and gas from the Gulf.

For Singapore-based trade finance providers, commodity traders and logistics companies, this presents an operational challenge that will likely place additional strain on compliance infrastructure, legal resources and risk appetite in the months ahead.

Singapore’s strategic moment

In this environment, Singapore’s role as a regional hub represents both a point of exposure and a source of strategic value.

The country’s deep institutional relationships, its sophisticated legal and regulatory framework, and its expertise in trade finance and compliance position it to play a stabilizing role for businesses navigating a more fragmented global trade environment.

Singapore’s LNG terminal infrastructure and fiscal buffers are also critical advantages, allowing the city-state to access world markets even as supply tightens, although they offer little buffer against the inflationary consequences of elevated global prices.

A key question for Singapore’s policymakers and business community is not simply how to absorb the shock, but whether and how to use this period to deepen the capabilities — in compliance, risk management, energy transition and supply chain resilience — that could shape the next era of Asian trade.

Doing so will likely require clear-eyed leadership and a willingness to pursue structural change that outlasts the current crisis. While transit through the Strait of Hormuz may soon normalize, the broader fragmentation pressures it has exposed may prove harder to unwind.

Choon Hong Chua is a senior director at Moody’s.