Beyond oil: the blocked Gulf inputs that hurt Asia the most

It turns out that the Strait is a critical chokepoint for far more than oil.

• For example, the Gulf is a major supplier of fertiliser inputs (e.g., urea) and helium to Asia. As these become scarcer, the prices of food and semiconductor chips will skyrocket.

In late March, IMA Asia invited Nenad Pacek, founder of the EMEA Business Group and a 35-year veteran of Middle East business intelligence, to share his expertise with our members.

The second-order supply shocks building behind the scenes were discussed. Even if the Strait were to reopen in the coming days or weeks, stockpiles of critical inputs are rapidly depleting, and damaged production sites across the Gulf will take time to repair.

The impact across Asia will vary by industry and degree of dependence, but long-tail inflationary effects are to be expected. There appears to be no quick fix.

Even in the base case of the war ending in the next month or so, Pacek advised:

The clearance of the logjam and backlogs will take a while… our shipping clients believe this could linger into late Q2 or later.

Below is a sample of the shortages to watch out for, along with a checklist to help Asia CEOs take action.

The chips and electronics industries face helium and bromine shortages

Helium is a big ingredient for the semiconductor industry. About 30% of the global supply comes from the region, mainly Qatar. Now it’s completely disrupted as well.

Helium: Operations at QatarEnergy’s Ras Laffan Industrial City, the world’s largest LNG export facility, which produces helium as a byproduct, were halted after it was struck by an Iranian drone early in the war. Iranian missiles subsequently crippled the plant further. Spot helium prices have since doubled.

For Asia’s chipmakers, the exposure is acute as stockpiles deplete.

• South Korea and Taiwan source more than 60% of their helium from Qatar, leaving them highly exposed.
• Japan has a more diversified supply base, sourcing only 30% of its helium from the Gulf.

Bromine: used in precision chip etching and as a flame retardant in circuit boards, is also putting Korea’s electronics industry at risk. It is a quiet chokepoint that gets little media coverage but has a high concentration risk.

• Around two-thirds of the world’s bromine production comes from Israel and Jordan (from the Dead Sea), but Korea relies on Israel for most of its supply.

The food and ag industries face fertiliser shortages (lacking inputs like urea, sulphur, etc.) as the planting season looms

About 35% of the world’s fertiliser imports come from the Gulf. And about a third of the world’s urea passes through the Strait of Hormuz.

The price of fertiliser has skyrocketed as shortages mount. The timing could not be worse for countries like India, with planting season on the way.

• India has an 800,000-ton deficit in its monthly urea production of 2.6 million tons due to limiting industrial gas supply to the 70–75% range. Furthermore, disruptions to ammonia imports have brought local production to a standstill, as the country sources 80% of its ammonia needs from the Gulf region. India is turning to Chinafor assistance.
• Australiaexpects current stocks to run out by mid-April, as it sources over 60% of its urea from the Middle East.

A domino effect… Strait closure leads to shortages of urea and sulphur, which in turn cause shortages of nitrogen and phosphate fertilisers. Down the road, this could lead to lower crop yields, food price inflation, and potentially political instability.

…on time delay. Experts expect inflation to spike mid- to late Q2 if the war extends. Food inflation will lag behind fertiliser price rises by three to six months, meaning H2 2026 is the key window to watch for food price cascades in Asia.

Manufacturers face shortages in petrochemicals and aluminium

A lot of the world’s supply chains — whether it’s the car industry, heavy industry, or plastics — depend on critical petrochemical components from the Gulf. And a lot of that is just simply not leaving.

Petrochemical shortages are the hardest to quantify but could potentially result in the broadest shock.

The Gulf’s SABIC, BOROUGE, QAPCO, and affiliates produce ethylene, propylene, polyethylene, methanol, and hundreds of downstream derivatives used globally in electronics, packaging, automotive, and pharma applications.

For aluminium, it goes beyond logistics headaches. Iran has targeted the region’s major aluminium plants with missiles and drones.

Kuwait, Qatar, and Bahrain are all stuck. All the aluminium exports from Bahrain are stuck, which has a global impact on top of everything else. The Middle East supplies 9% of the world’s aluminium, and Bahrain accounts for 3%.

Aluminium prices hit a four-year high in March, with some suggesting they could reach $4,000 per ton if the industry faces severe disruption. One caveat: Chinese-invested aluminium plants in Indonesia are expected to ramp up production this year.

A global logistics logjam — ships and containers stuck in the Gulf

Ships and containers unable to offload their cargo remain in the Gulf, tying up shipping capacity needed elsewhere and driving prices higher.

Hundreds of thousands of containers —up to 2 million TEU of cargo once downstream disruption is considered — are caught in the Gulf. That’s a global shipping disruption because those containers cannot be in Asian ports, the Port of Los Angeles or Rotterdam. So it’s already significantly increasing global shipping costs.

The routing problem is not easily fixed – there are few port alternatives to the Strait in the region.

If you look at the total quantity of goods that are normally passing through the strait in peacetime, the alternative shipping routes can take only one third of the total goods. Only one third. That’s it.

One Asia CEO wondered if multiple ports in the region could absorb the overflow:

Do you see smaller ports becoming activated — Jeddah, Sohar and Salalah in Oman, Fujairah? We keep hearing names. I know there’s a lot of congestion. But do you see companies doing something, or is it just not feasible?

But nearby safe harbours have caused overland congestion:

Most of our clients cannot move their goods in and out of the territory. There are about 650,000 trucks across the GCC markets, and to move everything, you would need about 1.8 million trucks. They just don’t exist. No one was thinking about this type of eventuality. There is no alternative.

Beyond oil: a four-point checklist to minimise input disruption and boost resilience

1. Control Strategic Resources

✔️ Audit ‘invisible’ inputs for Gulf exposure: Go beyond Tier 1 materials, for example:

• Request a 48-hour report on your company’s exposure to gases like helium, bromine, and sulphuric acid.
• Do the same for petrochemicals.

✔️ Move the Chief Procurement Officer (CPO) to direct reporting status.

• Input security is no longer a cost-centre when there is an existential risk.

✔️ Inventory reclassification:

• Shift inventory KPIs to track resilience rather than efficiency.
• Re-allocate capital to support ‘input buffering’ for the next six to 18 months.
• Stockpile non-perishable minerals or specialised chemicals needed for survival.

2. Localise Regional Supply Chains

✔️ Vertical integration: Move relationships from transactional to partnership with key input providers.

• Evaluate acquisitions or long-term agreements with midstream processors to secure supplies at the source, avoiding price fluctuations on the spot market.
• In a shortage, suppliers will choose the partner who shares data, offers pre-payments, and stands by them in the lean times.

✔️ Diversify and pivot:

• Explore alternative suppliers, such as integrating with Indonesian aluminium suppliers (coming online this year) or Vietnamese electronics clusters (to diversify exposure away from South Korea).
• Be able to scale operations up or down by 30% in a quarter based on material and energy availability.

✔️ Close the loop:

• If aluminium prices remain high, redesign products using alternative composites or recycled feedstocks.
• Or better yet, incentivise circular design. The most secure supply chain is the one that harvests its own raw materials from the secondary (scrap) market.

3. Operational Adaptability

✔️ AI risk simulations: Use AI to model and ‘twin’ your company’s supply chain.

• Simulate a 12-month Hormuz closure to stress test supply chain breaking points and timelines.
• Ensure that your use of AI is encrypted and secure to prevent industrial espionage.

✔️ Plan for energy rationing: Prepare brownout protocols to minimise disruption.

• If regional governments prioritise residents over industry (as seen in Myanmar and Bangladesh), ensure your facilities can still operate at reduced capacity.

4. Stakeholder and Labour Management

✔️ Inflationary buffering: With food prices projected to rise substantially in Asia by year-end (possibly by 50% in Malaysia), food insecurity and labour unrest are a vital concern.

• Track food prices and proactively adjust labour contracts to ease strain and avoid worker strikes.

✔️ Government relations: Shift your company’s positioning from foreign operator to national partner.

• Apply for ‘essential industry’ status in key jurisdictions (e.g., Malaysia, Thailand) to keep your factories running.
• Engage with regional governments on energy and water-sharing arrangements to ensure industrial parks are prioritised during shortages.

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Thank you for your time.

The IMA Asia Bulletin is a curated mix of brief, timely insights from our forums or monthly catch-ups with IMA members. Our sessions are convened under the Chatham House Rule, and quotes are edited for brevity and clarity.

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