Trump’s 20% Hormuz toll jolts markets as Asia adapts to oil shock

Asia’s economies are once again staring down the barrel of the Strait of Hormuz as the latest breakdown of the US-Iran ceasefire and Washington’s decision to impose a blockade-cum-toll threaten to keep energy costs elevated and shipping flows under strain. But economists and shipping analysts say the region is better placed to absorb the blow this time round. Oil prices jumped to a one-month high of US$84.78 a barrel on Tuesday morning as renewed fighting between Iran and the US over control of the strait – the conduit for a fifth of the world’s crude oil and gas in peacetime – rattled markets once more. It is a sharp rise, but a far cry from the nearly US$120 a barrel oil touched at the conflict’s peak in April. Earlier, US President Donald Trump announced that Washington would levy a 20 per cent charge on cargo passing through Hormuz, framing it in a Truth Social post on Monday as fair “reimbursement” for the US providing “safety and security” in the waterway. The move marks a reversal not only of America’s decades-old commitment to freedom of navigation, but of its own earlier pledge to impose no such fee at all. Shipping industry watchers are sceptical that the toll will achieve what Trump intends. Gnanasekar Thiagarajan, director of Mumbai-based financial research firm Commtrendz Research, said that shippers whose vessels were stuck in the Strait of Hormuz would be “happy to pay”, but others were unlikely to risk it. “Trump thinks that it will be a revenue earner, but the market is exploring new routes which will not pass through Hormuz,” he said. With ample crude available from other sources, Thiagarajan said he expected only a “limited impact” from the blockade – though Asia, as the destination for most cargo passing through Hormuz, remained the most exposed region. Oil could climb by another US$5 to US$10 a barrel “depending on how fast the situation is resolved”, he said, with the per-barrel price of US$90 to US$95 likely to prove “a very tough barrier to cross”. Ports such as Fujairah in the United Arab Emirates were fast emerging as viable alternatives to the strait itself, Thiagarajan said. Shipping traffic through Hormuz has reversed its earlier recovery, according to an ANZ report published on Monday, with both inbound and outbound movements falling over the past week as shipowners weigh the risks. Rystad Energy has tracked vessel transits falling from around 20 on July 6 to just 11 the day after, a figure it expects to “almost certainly” stay depressed “until the security situation becomes clearer”. Washington and Tehran have both said diplomatic channels remain open, even as their militaries clash. Bending, not breaking For economists, the region’s story amid the Iran conflict is one of adaptation. “Asian economies are now adapting reasonably to high energy prices,” said Jamus Lim, an associate professor of economics at ESSEC Business School, pointing to Middle Eastern oil and gas exports that had largely found new routes to market. He expects the 1 to 2 per cent economic downgrades that were pencilled in earlier this year to hold, but not deepen, “unless new developments warrant”. Asian economies are now adapting reasonably to high energy prices Jamus Lim, economist Louise Loo, head of Asia economics at Oxford Economics, struck a similarly measured note, forecasting regional growth of 4.2 per cent this year, easing to around 4 per cent in each of the following two. Her caveat was that supply chain disruption in petrochemicals, refined fuels and naphtha would continue, albeit “at a lower intensity than in the past quarter”. Loo said she believed regional growth had bottomed out in the second quarter, with a gradual recovery set to build through the year. Compounding the volatility is Ukraine’s recent long-range drone campaign against Russian oil refineries, which has knocked out production at multiple sites and is adding fresh uncertainty to global energy flows. Limited buffers Tech exports have emerged as a crucial buffer for the likes of Singapore, Malaysia and Vietnam, where soaring demand tied to the AI boom has helped offset the drag from costlier oil, according to Loo Such cushioning has its limits, however. Singapore’s growth slowed to 5.7 per cent in the second quarter, down from 6.3 per cent in the first, according to advance trade ministry estimates released on Tuesday – a sign that even AI-driven momentum cannot fully insulate the city state from geopolitical shocks. Malaysia’s figures tell a similar story: growth beat expectations at 5.4 per cent in the first quarter but is forecast by Moody’s to slow to 4.4 per cent in the second. Fuel subsidies had shielded households from much of the pain, the ratings agency said, but industries reliant on diesel and unsubsidised fuel are still exposed to global price swings. Elsewhere in the Asia-Pacific, Moody’s expects South Korea’s central bank to raise rates by 25 basis points to 2.75 per cent to rein in inflation that is expected to ease once energy prices do. In India, retail inflation climbed to 4.38 per cent in June from 3.93 per cent in May, driven by food and transport costs and pushing the rate above the central bank’s 4 per cent target, according to government data released on Monday. India faces a double bind: on top of conflict-driven energy costs, deficient monsoon rains linked to El Nino conditions threaten to add a further inflationary sting, though the true scale will not become clear until the rainy season ends in September. Lim expects India’s agricultural self-sufficiency to cushion the most vulnerable households, with government support measures likely “if the weather shock makes things much more difficult”.

Trump’s 20% Hormuz toll jolts markets as Asia adapts to oil shock

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Alternative trade routes and an AI tech boom are helping the region cushion the blow of a threatened maritime tariff

Alternative trade routes and an AI tech boom are helping the region cushion the blow of a threatened maritime tariff