Energy Crisis Turns Into Currency Crisis for Asia’s Emerging Markets

KUALA LUMPUR — Asia’s emerging economies are now facing a deeper financial challenge as the global energy crisis begins to turn into a currency crisis. Rising oil and gas prices have increased pressure on countries that rely heavily on energy imports, forcing investors to reassess the strength of regional currencies.

According to Bloomberg Opinion columnist David Fickling, many of the worst-performing currencies since the start of the U.S.-Israeli conflict with Iran have come from energy-importing economies. These include the Egyptian pound, Philippine peso, South Korean won and Thai baht. In contrast, several currencies linked to oil-exporting nations, including the Brazilian real, Kazakhstani tenge and Nigerian naira, have performed better.

The currency pressure is closely linked to the sharp disruption in global energy markets. Reuters reported that the Iran war and the closure of the Strait of Hormuz have removed almost 20 million barrels per day of Middle Eastern oil from the market, equal to about one-fifth of global supply. Asia has been among the hardest-hit regions because it previously sourced around 60% of its oil from the Gulf.

For emerging Asian markets, the problem is not only expensive energy. When oil and gas prices rise, import bills also increase, especially because energy is largely priced in U.S. dollars. This raises demand for dollars, weakens local currencies and makes fuel imports even more expensive. The result is a cycle that can push inflation higher and reduce room for central banks to support growth.

Indonesia and India are among the clearest examples of this pressure. A Reuters poll showed that bearish sentiment toward the Indonesian rupiah and Indian rupee has deepened as high crude oil prices continue to weigh on both currencies. The rupiah recently touched a record low of 17,535 per U.S. dollar, while the Indian rupee has fallen more than 6% so far this year.

The pressure also affects government finances. Some Asian governments have used subsidies or price controls to reduce the burden on consumers, but this can increase fiscal costs if energy prices stay high. BNP Paribas Economic Research noted that countries such as India, Indonesia, Malaysia and Thailand have used energy or fertiliser subsidies, with the impact remaining manageable as long as crude oil prices do not stay above US$100 per barrel for the year.

Malaysia appears relatively more resilient compared with several regional peers because it is a net energy exporter. Reuters noted that market views on the Malaysian ringgit have become more positive, partly due to Malaysia’s position in the energy sector. However, Malaysia is still not fully protected from global volatility, as weaker regional demand, higher import costs and unstable financial markets can still affect business sentiment.

The broader risk is that the energy shock could become a longer-lasting economic problem for Asia. If oil prices remain elevated, energy-importing countries may face weaker currencies, higher inflation, larger subsidy bills and slower growth. For investors, the key question is no longer just about fuel supply, but whether Asian economies can protect their currencies while managing the cost of energy.