MUFG analysts said Asian currencies and interest rates may face pressure if the Iran conflict disrupts oil supply through the Strait of Hormuz. They said markets are tracking developments in the conflict and the effect on oil prices. They said Asia would be among the hardest hit regions if the Strait of Hormuz is disrupted, with 90% of the oil shipped through it going to the region. They also said Asia depends heavily on energy imports from the Middle East.

Asia Energy Exposure And Supply Risk

They reported that Asia imports close to 60% of its crude oil, 22% of refined petroleum, 20% of natural gas, and more than 40% of other gases such as LPG from the Middle East. They said risks extend beyond higher oil prices to possible energy shortages and supply chain disruption. They said these conditions could weigh on regional growth and add to inflation risks. They added that the following week’s focus includes G10 and Asian central banks assessing inflation from the recent energy shock while domestic growth remains uneven. The ongoing Iran conflict poses a significant threat to oil supplies passing through the Strait of Hormuz. We see Asian currencies and interest rates as particularly vulnerable due to the region’s heavy reliance on Middle East energy. This creates clear risks of both energy shortages and broader supply chain disruptions for the coming weeks. Given that Asia receives 90% of the oil that moves through the Strait, a direct response is to short the currencies of the most dependent importers. With India importing over 85% of its crude oil needs, its currency is extremely exposed, making put options on the Indian Rupee (INR) against the U.S. dollar a logical trade. Similar strategies could be applied to the South Korean Won (KRW) and the Thai Baht (THB).

Positioning Ideas For Currencies Oil And Rates

From our perspective in early 2026, we only have to look back to the 2022 energy price shock to see a precedent for this. We saw then how Brent crude futures shot above $120 a barrel, causing significant depreciation in net-importer currencies as their trade deficits ballooned. That recent history strongly suggests a similar pattern is likely to repeat itself now. Direct exposure through oil derivatives should be considered, with Brent crude already pushing past $95 a barrel on the latest news. We believe long positions in oil futures or buying call options on oil ETFs are a straightforward way to capitalize on further supply fears. Call options in particular offer a defined-risk way to gain upside exposure if the geopolitical situation deteriorates further. We must also anticipate the inflationary impact on central bank policy, which creates opportunities in interest rate derivatives. Central banks across Asia that were previously considering rate cuts may now be forced to hold steady or signal a more hawkish stance to combat rising energy costs. This makes positions that bet on short-term interest rates remaining higher for longer increasingly viable. The heightened uncertainty makes a general spike in market volatility highly probable. Traders should consider buying options to trade this expected increase in price swings, particularly in currency pairs like USD/KRW. This allows one to profit from the instability itself, which is a key feature of the current market. Create your live VT Markets account and start trading now.

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