📈 Impact of Prolonged Iran Conflict on APAC Energy & Commodities

Fitch Ratings indicates a divergent credit outlook for the Asia-Pacific region as supply disruptions in the Gulf pressure global markets. While upstream exporters gain from price surges, downstream processors face significant margin compression. • Energy Sector Dynamics: Upstream oil and gas producers in Australia, Malaysia, and Indonesia are primary beneficiaries of higher realized prices. Conversely, downstream refiners in India and Indonesia face severe pressure as rising input costs outpace their ability to pass through prices to consumers. • Power & Coal: Rising gas prices (with 20% of global LNG supply at risk from Qatar) are driving a shift toward thermal coal. Newcastle coal futures rose 9% to US$ 129 per ton as of March 3, 2026, benefiting Australian and Indonesian exporters. • Industrial & Manufacturing Impact: • Metals: Global aluminum supply (8-9% from the Middle East) is tightening. Chinese producers are well-positioned due to stable power tariffs, while Japanese and South Korean firms face margin erosion from energy inflation. • Steel & Chemicals: Steel producers face negative outlooks due to logistics bottlenecks and a potential softened demand from the Middle East (15% of 2025 Chinese exports). Chemicals face "high risk" as naphtha feedstock costs spike. • National Economic Context: For Sri Lanka, these APAC trends signal potential import-led inflation in the energy and fertilizer sectors. As a downstream consumer of refined fuels and industrial inputs, the rising costs and shipping delays in the Gulf could strain foreign reserves and production margins in the manufacturing sector.