Four Nations Face Acute LNG Disruption
In a note on March 12, 2026, Morgan Stanley economists warned that disruptions to liquefied natural gas (LNG) from the Middle East conflict represent a larger concern for specific Asian economies than the risks to oil supply. The bank identified India, Taiwan, South Korea, and Thailand as the most exposed. Their vulnerability stems from a high dependency on LNG imports from the Middle East combined with limited domestic inventory, a challenge created by the difficulties of storing LNG.
This heightened risk profile means these nations have little cushion to absorb a prolonged supply shock. With few immediate alternative sources available, they face a direct threat to their energy security, which could have significant economic repercussions.
Hormuz Closure Halts 20% of LNG Trade
The supply risk is centered on the effective closure of the Strait of Hormuz, a narrow shipping lane that handles approximately 20% of the world's daily LNG trade. The conflict has made transit through the chokepoint untenable, stranding tankers and forcing a halt to regional energy shipments. The market impact was immediate, with the benchmark Asia LNG price rising to $16 per MMBtu by March 10.
The disruption extends beyond LNG, crippling supply chains for other critical industrial inputs. Asia's petrochemical sector, which sources 54% of its naphtha feedstock from Middle Eastern suppliers, has seen immediate consequences. Petrochemical Corp of Singapore, Indonesia’s Chandra Asri, and South Korea’s Yeochun NCC have all declared force majeure, citing disrupted feedstock deliveries.
Shift to Coal and Industrial Curbs Loom
Faced with an inability to secure LNG shipments, the exposed Asian economies have limited and undesirable options. According to Morgan Stanley, these nations are likely to pivot to alternative fuels for power generation. Coal, which offers more flexibility to increase consumption rates, stands as the most probable substitute, undermining regional environmental targets.
The alternative to finding another energy source is to reduce demand. Governments may be forced to curb consumption in their industrial sectors to conserve energy. Such a move would directly impact manufacturing output, slow economic growth, and potentially fuel inflation as energy costs climb.
