Asia’s Big Economies Brace for Iran War Energy Shock

The potential war in Iran poses significant economic risks to major Asian economies, including China, Japan, and South Korea. A 10% rise in oil prices and partial blockade of the Strait of Hormuz could lead to substantial GDP losses for these countries.

Estimated GDP Impact

• China: -0.5 pp to -1.0 pp (≈ $70-140 billion) of annual GDP
• Japan: -0.18 pp (≈ $30 billion) if crude oil prices reach $87/bbl, and -0.2 pp to -0.4 pp (≈ $40-80 billion) in a worst-case $140/bbl scenario
• South Korea: -0.2 pp (≈ $12 billion) per 10% oil price rise, and -23% (≈ $1.2 trillion) in an extreme ‘full-scale war’ stress-test

  Energy-Price Channel and Transport-Cost Channel

  The primary transmission mechanism is the rise in crude-oil and LNG prices when the Strait of Hormuz is disrupted. Rerouting tankers around the Cape of Good Hope adds 10-15 days and $1 million per voyage, inflating freight rates and insurance premiums.

  Inflation Feedback

  A 10% oil-price jump lifts inflation by ≈ 0.2 pp in China, 0.3 pp in South Korea, and 0.2 pp in Japan, eroding real-GDP growth further.

Sources

• Economy.ac – “10 Trillion Dollars in Global GDP Could Vanish in the Event of a …” (28 Feb 2026)
• SYZ Group – “Iran war: impact on the global economy and financial markets” (4 Mar 2026)
• Nippon.com – “Japan Institute Produces Scenarios Assessing Economic Effects” (5 Mar 2026)
• AsiaFinancial – “War in Iran Could Hit Some of Asia’s Biggest Economies Hard” (3 Mar 2026)
• The New York Times – “Already Weathering a Trade War, Asia Now Faces a New Energy Threat” (4 Mar 2026)