My Take | Will fresh Middle East tensions blow up risks for small Asian firms?

Asian firms worry that Iran-Israel tensions could extend to the Strait of Hormuz – a vital oil corridor for Asia – and provide more fuel to oil prices

Many Asian firms also pin their hopes on central banks easing interest rates this year but doubts linger over banks following through, especially if inflation rises

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A statue of an oil rig in front of the Energy Ministry building in the Venezuelan capital Caracas. The United States this week decided to reinstate oil sanctions on key oil producer Venezuela. Photo: Reuters

Published: 10:30am, 19 Apr 2024Updated: 11:13am, 19 Apr 2024

Iran’s attack on Israel last Saturday has heated up oil prices and kept markets on edge, a development that bodes ill for Asian businesses that depend on energy supplies and fuel-based raw materials.

Oil prices see-sawed this week as 10-month-high US crude oil stockpiles partly offset the impact of renewed Middle East tensions, but prices remained close to the year’s high of US$87 per barrel, amid worries of Israel’s retaliation.

The United States this week decided to reinstate oil sanctions on key oil producer Venezuela, in response to President Nicolas Maduro’s failure to meet his election commitments, adding to the volatility. But the biggest worry is that the Iran-Israel tensions could spill to the Strait of Hormuz – a vital oil corridor for Asia.

A helicopter raid on a vessel near the Strait of Hormuz. Iran-Israel tensions could spill over to the Strait of Hormuz – a vital oil corridor for Asia. Photo: AP

This comes even as prices of industrial minerals such as copper and zinc have bubbled up to multi-month highs, while searing weather threaten food output. For most of Asia, it means the prospect of inflation is a real worry.

Will another year of volatility sound the death knell for Asian small and medium-sized businesses that are already stretched to their limits?

The answer will probably depend on their respective governments’ response to aid their survival and how these firms navigate these geopolitical tensions.

Asia is expected to remain the sweet spot for global growth in coming years, but a January survey by global accounting firm PwC showed that nearly two-thirds of Asia-Pacific CEOs were not confident of their long term survival despite rejigging their business models.

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