Asia Absorbs Hormuz Shutdown as Feared Energy Collapse Fails to Arrive

Key Points

1. Asia replaced most oil lost when Iran effectively closed the Strait of Hormuz, the New York Times reported.
2. Roughly 10 million barrels a day of Middle Eastern crude vanished from the market after the closure.
3. Resilience came at a price: oil near $100, LNG costs doubled, blackouts in Pakistan and Bangladesh.

The latest:

More than half a year after Iran effectively shut the Strait of Hormuz, the severe shortages Asian governments braced for have not materialized, according to a New York Times analysis based on data from cargo tracker Kpler. Buyers found bypass pipelines, new suppliers and, in China’s case, simply bought less. The cost has been steep: oil hovers near $100 a barrel.

Details:

• The shock: Roughly 10 million barrels a day of Middle Eastern crude disappeared when the strait closed, cutting off more than half of Asia’s oil supply. Governments declared states of emergency, motorists queued at gas stations, and oil and LNG prices soared before shipments rebounded by July.
• The bypass routes: Asian buyers turned partly to the United Arab Emirates and Saudi Arabia, which operate pipelines carrying crude to customers without transiting the strait. Those routes restored about a third of the lost daily supply, according to Kpler. Some tankers have also been getting through the strait with US Navy assistance.
• China’s retreat: Beijing imported about a third less crude in July and August than a year earlier, falling from 88 million metric tons to 61 million. It bought less from nearly every supplier, drew on its large reserves, cut some refinery runs and leaned on growing electric-vehicle use.
• India and Russia: Washington granted waivers allowing oil-strapped allies to buy Russian crude as an exception to sanctions. After briefly slowing purchases, India resumed buying, lifting Russian volumes by nearly 50%, while its Middle East intake fell by 9 million metric tons.
• Japan pivots west: Japan and South Korea turned increasingly to the United States, helping imports rebound after a sharp early-crisis drop. Japan bought over eight times as much American crude this year as last, offsetting a 4 million metric ton Middle East decline. US shipments to Asia rose to 2.3 million barrels a day in July from 1.5 million.
• Demand destruction: No combination of suppliers replaced everything lost. Kpler estimates the war has cut global oil demand by around 2%, while governments released strategic reserves and companies drew down stockpiles. Kpler senior crude analyst Muyu Xu said adding suppliers alone was never enough against a 10 million barrel loss.
• The gas gap: Qatar and the UAE supplied about a quarter of Asia’s LNG last year, and nearly all of it stopped. The United States, Canada and others added roughly 10 million metric tons combined, but a shortfall remains. Gas is hard to store, leaving importers with thin reserves.
• Winners and losers: Taiwan more than replaced lost Qatari cargoes, adding 1 million metric tons from the Americas and 0.8 million from Asia Pacific. Pakistan could not: imports fell from 1 million metric tons to 0.4 million, and rationing and rolling blackouts followed there and in Bangladesh.
• The price: Asian buyers purchasing LNG for near-term use are paying more than double a year earlier. Oil briefly surged to around $150 a barrel in April and remains near $100. High gasoline prices have triggered protests in several countries.

Background:

The strait is the chokepoint for Gulf crude and LNG heading east. Its effective closure by Iran removed the single artery on which Asia’s largest economies had built their import strategies, exposing how much of the region’s supply depended on one waterway.

Between the lines:

The New York Times draws two lessons: Asian markets proved more resilient than expected, and the region may not want this much Gulf exposure again. Both rest on the same evidence — the adjustment worked through bypass pipelines, American barrels and reduced consumption, not restored Hormuz traffic. Resilience here means substitution and rationing, which is why Pakistan’s blackouts sit alongside Taiwan’s full replacement.

What’s next

Winter is the next test: Asian buyers will compete with Europe for gas, which Kpler’s Go Katayama expects to keep prices elevated through at least year-end. China has only recently resumed raising imports, tightening oil balances further.