‘Very low chance’ that US-Iran deal reverts energy flows to South-east Asia through Hormuz: Bloomberg Economics

[SINGAPORE] A US-Iran deal to end the war could offer some respite to South-east Asian economies in the form of lower oil prices, but economists from Bloomberg Economics note that structural supply disruptions are unlikely to be fixed overnight.

Tamara Henderson, South-east Asia economist at Bloomberg Economics, does not expect that a deal will grant immediate relief to disrupted fuel shipments flowing through the Strait of Hormuz, she said at a media event on Monday (Jun 15).

“There is a very low chance that the Strait of Hormuz would revert to its pre-war state,” she said.

This is despite officials from both countries announcing on Sunday that they had agreed on a framework to end the ongoing conflict, lift the US blockade of Iran and reopen the Strait of Hormuz.

“A pact is one thing, implementation is going to be another,” said Henderson.

She noted that it may be difficult for a substantive agreement to be reached as the US and Iran remain deeply misaligned on key terms, including recognition of Iran’s control of the strait, a condition proposed by Iran during talks in Islamabad in April.

“There is a lot of distrust on both sides,” she added.

Iran has also been emboldened by the relative ease with which it has been able to influence shipping flows through the strait since the conflict began, Henderson noted.

“We see energy disruptions persisting in some form, for some time, with a very low chance that the Strait of Hormuz would revert to its pre-war state.”

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Shipments moving through the Strait of Hormuz normally supply about a fifth of global oil and liquefied natural gas needs, largely to Asia. As much as 90 per cent of the crude oil supply of South-east Asian economies, such as the Philippines and Vietnam, is imported from the Middle East.

Bloomberg Economics noted that South-east Asia would have to establish a new equilibrium in both the demand and supply sides of its oil market.

On the supply side, the research unit said that the region may have to look to increase oil and gas production capacity beyond the Middle East, rely on reserves in the South China Sea, or look towards alternative energy sources such as renewables, coal or biofuel.

As these supply-side adjustments may take time, Henderson noted that the region is likely to turn to demand-side measures, for instance cutting energy consumption through government-led measures such as incentives, or by improving fuel efficiency for industrial and consumer use.

Growth to moderate in H2

Combined with the impact of US tariffs imposed on the region’s economies, the oil shock is likely to cause real gross domestic product growth in most South-east Asian economies to slow down over the rest of 2026, said Bloomberg Economics.

A forecast by the research unit, made before the framework was agreed on Sunday, projected that the GDP of four South-east Asian economies – Indonesia, Malaysia, Singapore and Thailand – will moderate year on year in the remaining three quarters of 2026.

The Philippines, where GDP growth decelerated steeply in the second half of 2025 following a government corruption scandal over public infrastructure, could see growth momentum return in the second half of 2026 as government spending picks up.

Energy costs will continue to have an impact on inflationary pressures across the region, Henderson noted, adding that costs could peak as high as 7 per cent in the Asean-5 economies if oil prices remain elevated.

But oil prices tumbled after the US-Iran agreement on Sunday, sparking hopes of a relief rally for the region’s policymakers – which Henderson noted have become increasingly strained fiscally.

The debt-to-GDP ratios of Thailand, Malaysia and the Philippines have hovered around the 60 per cent mark – a common benchmark for fiscal sustainability, she said. This could limit these economies’ ability to support growth or cushion households from inflationary pressures.