Middle East energy shock pushes Asia's fuel costs to more than double pre-war levels: Report

New Delhi: The Middle East energy shock is pushing fuel costs in Asia to more than double pre-war levels, as disruptions to energy supplies shift from crude oil to refining and shipping bottlenecks, according to a report by BlackRock. 

The report said supply buffers, including rerouted shipments, inventories and strategic reserves, had helped absorb the initial disruption in crude supplies. However, renewed attacks targeting energy infrastructure and shipping routes in the Gulf are testing these buffers, while supply constraints are increasingly affecting downstream fuel markets. 

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

Brent crude oil surged to around USD 117 per barrel on October 23, its highest level since April. However, at the time of filing this report, prices had eased to USD 110.18 per barrel, down 2.87 per cent. 

The impact has been more pronounced in some downstream segments. Shares of refiners have risen around 160 per cent this year, while tanker operators have gained 120 per cent, compared with a 40 per cent increase in major oil and gas producers. 

BlackRock said the effects of the energy shock remain uneven across regions, with Europe particularly vulnerable. The firm estimated that the shock had reduced Europe's gross domestic product (GDP) by around 0.5 per cent, compared with 0.1 per cent in the United States. 

European natural gas storage stood at around 75 per cent, its lowest seasonal level since recordkeeping began in 2011. With liquefied natural gas supplies disrupted, a colder winter could push energy prices higher. European energy prices have already increased 170 per cent this year, the report said.

The firm said the United States was better insulated as a net energy exporter, while strong technology exports had cushioned Asia from higher energy import costs.

BlackRock expects the shift towards energy security and infrastructure investment to continue even if the conflict ends.

"We see this as a structural shift that could outlast the conflict," it said, adding that the investment required to build alternative supply routes and strengthen energy resilience could intensify competition for capital and put further upward pressure on long-term government bond yields.

The report said the emerging environment would require greater selectivity as energy constraints and supply bottlenecks create new vulnerabilities across regions and sectors.