Deutsche Bank has issued a warning that the Strait of Hormuz, a critical global energy chokepoint, handles approximately 20% of worldwide oil consumption and 20% of liquefied natural gas (LNG) supply, with virtually no viable alternative routes currently available.

Following joint US-Israeli military actions, the Iranian navy has announced a ban on vessels passing through the Strait of Hormuz. Although Tehran has not yet issued an official state declaration, the credible threat of a blockade has already driven a decrease in transit shipping volumes and a rapid increase in transportation costs—a trend that is beginning to manifest in the markets.

Among all Asian economies, Japan and South Korea are expected to bear the brunt of the impact. Japan relies on imports for 87% of its total energy consumption, while South Korea's dependence is as high as 81%. Furthermore, over 70% of the crude oil imported by both nations originates from the Middle East, with the majority requiring transport through the Strait of Hormuz. Deutsche Bank believes that this high import dependency makes the energy security of Japan and South Korea particularly vulnerable in the current crisis. A sustained supply shock would pose a significant threat to the economic stability of both countries.

Asian foreign exchange markets have already shown expected weakness, with risk-sensitive currencies such as the South Korean won, Australian dollar, and Malaysian ringgit under noticeable pressure. Deutsche Bank is maintaining its current foreign exchange strategy portfolio, holding short positions on the US dollar against the South Korean won, Indian rupee, and Malaysian ringgit, and identifies Malaysia as the region's primary beneficiary from rising oil prices.

**Strait of Hormuz: An Irreplaceable Global Energy Artery**

Deutsche Bank notes that historical experience shows credible blockade threats alone are sufficient to reduce shipping activity and drive up transport costs, an effect already being felt in current markets—transit shipping numbers are declining, while tanker shipping costs continue to rise.

Citing data from the US Energy Information Administration (EIA), Deutsche Bank emphasizes that approximately 20% of global oil consumption and 20% of LNG supply transit through this extremely narrow waterway, with almost no practical alternative routes available.

This structural characteristic means any threat of closure to the Strait of Hormuz would have a profound impact on the global energy supply landscape, rather than merely causing a regional disturbance.

**Asia Bears 80% of the Impact: Highly Concentrated Energy Dependence**

The Deutsche Bank report clearly states that a closure of the Strait of Hormuz would deliver a highly asymmetric blow to Asia.

According to Deutsche Bank's calculations, approximately 89% of the crude oil and condensate passing through the strait is ultimately destined for Asia, while about 81% of LNG shipments are delivered to Asia. Asia's dependence on this route far exceeds that of any other region.

Within Asia, Japan, South Korea, and India are the primary destinations, collectively accounting for a significant share of the crude oil and LNG transiting the strait. This highly concentrated pattern implies that a closure would leave Asia facing a severe energy supply shortfall, with almost no possibility of mitigation through rerouting in the short term.

Deutsche Bank stresses that although some Asian nations have larger absolute import volumes, Japan and South Korea face more prominent risks from an energy security vulnerability perspective, due to their extremely high overall dependence on imported fossil fuels.

Specifically, Japan relies on imports for 87% of its total energy consumption, South Korea for 81%, while India's figure is only 35%. More critically, over 70% of the crude oil imported by Japan and South Korea comes from the Middle East, with most of it requiring passage through the Strait of Hormuz.

Regarding energy reserves, South Korea holds relatively ample reserves of approximately 52 days of natural gas and 60 to 70 days of crude oil; however, this buffer remains limited in the event of a prolonged closure. Deutsche Bank believes sustained supply disruptions would inflict substantial impacts on the energy security and economic stability of both Japan and South Korea.

**Macroeconomic Impact: Regional Divergence from Rising Oil Prices**

Deutsche Bank states that a prolonged closure of the Strait of Hormuz would exert sustained upward pressure on oil prices. Based on a scenario analysis of a 10% increase in oil prices, Asian economies would show clearly divergent impacts.

Regarding current accounts, Thailand, the Philippines, and South Korea would face the most significant negative shocks, closely linked to their high dependence on oil imports.

In terms of inflation transmission, South Korea, Singapore, the Philippines, and Thailand would exhibit the highest sensitivity—primarily due to their market-linked fuel pricing mechanisms, which allow international oil price fluctuations to be transmitted more quickly and directly to end-consumer prices. Deutsche Bank also notes that some countries could partially alleviate inflationary pressures through tax reduction measures, such as South Korea and Thailand.

**FX Strategy: Ringgit Benefits, Won Under Pressure but with Underlying Support**

Deutsche Bank points out that Asian foreign exchange markets weakened predictably after the market open, with risk-sensitive currencies like the South Korean won, Australian dollar, and Malaysian ringgit under the most pressure.

Regarding specific positions, Deutsche Bank is currently maintaining short USD positions against the South Korean won, Indian rupee, and Malaysian ringgit. For the won, Deutsche Bank believes seasonal factors (natural slowdown in fuel demand entering the second quarter), a strong electronics export cycle, and a market positioning structure that is not excessively long, all provide important support. Nevertheless, the bank acknowledges that a more significant deterioration in overall risk sentiment would prompt consideration of exiting this position opportunistically.