West Asia energy shock more than doubles Asia's fuel costs as supply disruptions bite

Refining and shipping bottlenecks are driving fuel costs higher despite a recovery in crude supplies, as renewed attacks on Gulf energy infrastructure test global supply buffers, BlackRock warns.

The West Asia energy shock is pushing fuel costs across Asia to more than double their pre-war levels, as disruptions to energy supplies spread beyond crude oil to refining operations and shipping networks, according to a report by BlackRock.

The global investment management firm said supply buffers, including rerouted shipments, inventories and strategic reserves, had initially helped cushion the impact of disruptions to crude supplies. However, renewed attacks targeting energy infrastructure and shipping routes in the Gulf are now testing these safeguards.

"Now scarcity has shifted downstream," BlackRock said, pointing to refining and shipping bottlenecks that have driven up fuel costs even as crude supplies begin to recover.

Brent crude prices surged to around $117 per barrel on October 23, marking their highest level since April. Prices subsequently eased to $110.18 per barrel, down 2.87 per cent, at the time of the report.

The impact of the energy shock has been particularly visible across downstream segments of the oil industry. Shares of refining companies have climbed around 160 per cent this year, while tanker operators have gained 120 per cent. In comparison, major oil and gas producers have recorded gains of around 40 per cent.

BlackRock said the economic fallout remains uneven across regions, with Europe emerging as particularly vulnerable to the supply disruptions.

The firm estimated that the energy shock had reduced Europe's gross domestic product (GDP) by around 0.5 per cent, compared with a 0.1 per cent impact on the US economy.

Europe is also facing mounting pressure on its natural gas supplies. Gas storage levels across the region stood at around 75 per cent, the lowest seasonal level since recordkeeping began in 2011. With liquefied natural gas (LNG) supplies disrupted, a colder-than-expected winter could push energy prices even higher.

European energy prices have already risen 170 per cent this year, according to the report.

The United States, meanwhile, remains relatively insulated from the crisis because of its position as a net energy exporter. Strong technology exports have also helped cushion Asia against higher energy import costs.

However, BlackRock warned that the implications of the crisis could extend well beyond the duration of the conflict.

The firm expects countries and companies to continue prioritising energy security and infrastructure investments, even if hostilities come to an end.

"We see this as a structural shift that could outlast the conflict," BlackRock said.

It added that investments in alternative energy supply routes and stronger infrastructure resilience could intensify competition for capital and put further upward pressure on long-term government bond yields.

The changing energy landscape will also require investors to become more selective, as supply constraints and infrastructure vulnerabilities reshape risks across regions and industries.