APAC Morning Brief: India and China Reroute as LNG Squeeze Intensifies
China continues receiving Iranian oil directly while India deploys naval escorts. LNG prices in Asia have surged 54% in a week. Fertilizer costs threaten rice planting season across Southeast Asia.
The week begins with Asia-Pacific markets bracing for another week of elevated energy costs. Here is what moved overnight and what to watch as Monday trading opens across the region.
Commodity snapshot (as of March 23)
Brent crude holds at $106.41 per barrel. WTI at $98.23. Gold continues its safe-haven rally at $4,575 per ounce. Natural gas at $3.10 per MMBtu. Copper at $5.37 per pound.
China: still receiving Iranian oil, but at what cost?
China remains the primary buyer of Iranian crude, with Chinese-flagged vessels continuing to transit the strait under informal arrangements with Tehran. Several ships have passed through Iran's newly established shipping channel north of Larak Island — reportedly paying up to $2 million per transit.
But China's strategic oil reserves, estimated at roughly one billion barrels, provide only a few months of buffer. More critically, one-third of China's total LNG imports come through the strait. QatarEnergy's force majeure declaration means this supply is severely curtailed.
Chinese refiners have begun restricting fuel exports to prioritise domestic supply — tightening refined fuel availability across the rest of Asia.
India: naval escorts and diplomatic balancing
India has deployed destroyers to escort tankers through the Gulf of Oman, though not through the strait itself. Two Indian-flagged gas carriers were allowed passage last week. India's Jamnagar refinery complex could become a critical alternative supply source for Asian jet fuel and diesel demand.
Japan and South Korea: 95% exposed
Japan's refiners source approximately 95% of their crude from Saudi Arabia, Kuwait, UAE, and Qatar — virtually all normally transiting Hormuz. Both countries are working with the IEA on coordinated reserve releases, but the 400 million barrel global release buys roughly 26 days at the current shortfall rate.
Australia: fuel rationing in Western Australia
Regional WA towns have imposed fuel purchase limits. Australia's mining sector, consuming 40% of national diesel, faces potential production disruptions. The country's 20-day fuel reserve is among the lowest in the developed world. Petrol has breached $2.20 per litre.
Southeast Asia: fertilizer and food security
Indonesia and Bangladesh, heavily dependent on imported urea for rice and maize production, face cost shocks across every input simultaneously — fuel, fertilizer, and the strengthening US dollar. If planting-season application rates drop, the region could see reduced crop yields by late 2026.
What to watch this week
The US has signalled that navy escorts through the strait could begin by end of March. Any confirmation would be the most significant development since the closure. Watch oil prices for immediate reaction.
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