Trump’s Hormuz blockade risks piling pain on Asia allies, China

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WASHINGTON – US President Donald Trump’s move to blockade the Strait of Hormuz risks deepening an unfolding economic crisis for Asia’s energy-dependent economies, including America’s allies in the region and China.

“For the global economy and markets, the latest developments shift the focus back towards downside risks, pointing to higher oil prices and a larger blow to growth and boost to inflation,” Bloomberg Economics’ analyst Jennifer Welch wrote in a note.

Global benchmark Brent crude oil rallied as much as 8.6 per cent on April 13 to more than US$103 a barrel, while European gas futures spiked almost 18 per cent at one point.

US forces will begin implementing the blockade, which applies only to vessels entering or departing Iranian ports, from 10am, New York time (10pm, Singapore time) on April 13, the US Central Command said.

Mr Trump’s announcement of the blockade plans came hours after the United States and Iran failed to reach a deal in direct talks in Pakistan.

Asian nations, including US allies such as Japan and South Korea, use more than 80 per cent of the energy that usually transits the strait.

Governments across the region have been scrambling to arrange alternative oil and gas supplies, trying to cut back energy use with steps like running air-conditioners at warmer settings and rolling out measures to soften the blow to consumers and businesses.

Iran-linked tankers, as well as others from nations including China, have been transiting the key waterway, movements that the blockade would target.

Coming ahead of Mr Trump’s planned trip to China in mid-May, Beijing may look to impose pressure on Washington to lift the blockade, with Bloomberg analysts saying it could leverage its dominance of critical minerals if needed.

In a separate report, Bloomberg Economics explored three scenarios for the war and global economy.

In the base case, the conflict continues at a lower intensity, with oil averaging US$105 a barrel in the second quarter before falling to US$85 in the fourth quarter. Global gross domestic product grows 2.9 per cent in 2026 in that scenario, while inflation prints at 4.2 per cent in the fourth quarter.

Higher-intensity fighting, with the Strait of Hormuz mostly shut for several months, would see oil prices rising to US$170.

Global growth slows to 2.2 per cent and inflation ends the year at 5.4 per cent in that scenario.

A lasting ceasefire or collapse of Iran could see the strait open sooner and oil costs falling back to pre-war levels, with global growth at 3.1 per cent and inflation ending the year at 3.7 per cent, the analysts wrote.

“The latest developments provide little clarity on which scenario is most likely to play out,” they wrote. “We’ll see how things play out, but right now our base case feels about right on the trajectory, even as details continue to evolve.” BLOOMBERG