A prominent international rating agency recently released a latest scenario analysis report warning that if the Middle East conflict extends beyond April and drives Brent crude oil prices to surge to approximately $200 per barrel, the banking sector in the Asia-Pacific region could incur an additional $180 billion in cumulative credit losses over the next two years compared to the baseline scenario. According to the report's calculations, under the baseline scenario, the direct impact of the war on the regional banking system remains relatively contained, with most banks possessing sufficient capital buffers. However, once the adverse scenario of high oil prices and supply chain deterioration is triggered, total cumulative credit losses for the 2026-2027 period will reach approximately $910 billion, exceeding the baseline estimate of around $730 billion.
Emerging economies such as Vietnam, Indonesia, and India are identified as high-risk markets, characterized by rapid credit growth and heavy debt burdens on corporations and households. Analysis indicates that banks are facing secondary effects transmitted via households, corporates, and government sectors. Prolonged erosion of profits and incomes by high oil prices will precipitate a deterioration in the credit environment. Banks with significant exposure to energy-intensive sectors such as aviation, energy, chemicals, and transportation face more pronounced asset quality pressures and need to accelerate increasing loan loss provisions and reassess industry concentration risks.
Previously, several institutions had revised the rating outlooks for the banking industries in Thailand, South Korea, and Vietnam to negative, citing energy shock risks stemming from the escalation of the Middle East conflict. Currently, Brent crude oil prices have settled at $102.8. If the Strait of Hormuz blockade continues, disrupting approximately 20% of global oil trade, the risk of oil prices breaking the $200 threshold is escalating. As the blockade action enters day two, shipping data shows multiple oil tankers have halted operations or turned back, and the actual impact of supply chain disruptions is continuing to unfold.
