Middle East Conflict Catalyzes Asian Energy Security Transition, China Leads Performance

Overview

This report deeply analyzes the status quo and response strategies of energy security in Asian countries against the backdrop of Middle East geopolitical conflicts. Nomura proposes the "Six Pillars of Asian Energy Security" framework and constructs the Nomura Asia Energy Security Index (NAESI) to quantify the preparedness of each economy. The report believes that although closure of the Strait of Hormuz causes short-term supply chain pressure, Asia demonstrates resilience thanks to strategic reserves and alternative energy. In the long run, energy security demands will drive the reshaping of investment and trade patterns in infrastructure, green technology, and critical minerals in Asia.

Core views

Energy Security Framework and Index Evaluation: The report defines six pillars of energy security: 1) Diversification of energy mix (reduce fossil fuel dependence, increase renewable energy, nuclear power, and EV penetration); 2) Diversification of supply sources (reduce dependence on single regions like the Middle East); 3) Strategic reserves and storage; 4) Improve energy efficiency (smart grids, strict standards); 5) Boost domestic production and resource exploration (oil/gas and critical minerals); 6) International cooperation. Based on the first five pillars, NAESI shows China is the clear winner, benefiting from its coal resource buffer, leadership in renewable energy and EVs, and diversified supply sources. Conversely, New Zealand scores lowest due to highly concentrated supply partners and lack of local resources, while Thailand lags due to heavy reliance on imported oil/gas and lower energy efficiency. Regional Divergence and Policy Response: Asian countries are actively adjusting policies to enhance medium-term energy security. China and South Korea set clear non-fossil energy goals; India, Malaysia, etc., are exploring or expanding nuclear capabilities; multiple countries attempt to reduce dependence on the Middle East by signing new supply contracts with the US, Latin America, and West Africa. Regarding reserves, Taiwan plans to increase LNG inventory days, India and China are also expanding strategic oil reserves and LNG storage capacity. In addition, India launched deep-sea exploration tasks to boost domestic hydrocarbon output. Macroeconomic Forecast Adjustment: Affected by energy shocks and internal factors, Nomura adjusted forecasts for some Asian economies. China 2026 GDP growth raised to 4.5%, but expectations for RRR cuts and rate cuts postponed to 2027; Hong Kong 2026 GDP growth significantly raised to 4.8%; Australia 2027 GDP growth lowered to 1.7%. In monetary policy, given weak currency and inflation pressures, Indonesia Central Bank expected to raise rates by 50bp in 2026, Philippines Central Bank to raise additional 75bp, South Korea and Taiwan also have certain probability of rate hikes.

Analysis framework

The report adopts a top-down macro analysis framework, first identifying geopolitical events (Middle East conflict) as external shock variables, then building a multi-dimensional evaluation system (six pillars) to deconstruct structural vulnerabilities and advantages of Asian countries. Through quantitative indicators (such as Herfindahl-Hirschman Index to measure supply concentration, proportion of fossil and non-fossil energy, EV penetration rate, etc.), synthesize comprehensive indices (NAESI), transforming qualitative energy security concepts into comparable quantitative scores. Finally, combined with national policy trends and fundamental data, derive revised forecasts for economic growth, inflation, and monetary policy.

Methodology notes

• Industry/Industrial Analysis Framework

  Asia Energy Security Index (NAESI)

  Nomura's self-built composite indicator, calculated by weighting standardized scores of energy mix diversification, supply source diversification, domestic resource acquisition, strategic reserves, and energy efficiency dimensions, used to horizontally compare Asian countries' ability to resist energy shocks.

• Industry/Industrial Analysis FrameworkSupply-demand framework

  Energy Supply/Demand Diversification Analysis

  Assessing vulnerability of supply side through analyzing energy import source concentration (HHI Index) and proportion of fossil/non-fossil in domestic energy structure, and replacement potential of demand side. This is the core logic for judging energy security.

• Macroeconomics Framework

  Geopolitical Shock Transmission Mechanism

  Analyzing how geopolitical conflicts (such as Strait of Hormuz closure) affect inflation levels and growth prospects of the real economy through channels such as supply chain interruption, price volatility, and reserve consumption, thereby guiding monetary policy shifts.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• China (Macro/Related Industries)

  Beneficiary

  Strengths

  Energy security score #1 in Asia, possesses coal buffer, renewable energy and EV leadership, diversified supply sources

  Comparison

  Superior to low-score countries like New Zealand, Thailand

  Risks

  Global demand slowdown may impact exports

• Australia (Macro/Energy)

  Coexistence of Structural Opportunities and Challenges

  Strengths

  LNG and critical mineral exporter, benefits from global energy transition demand

  Weaknesses

  Refined fuel highly dependent on Asian supply, GDP growth forecast lowered

  Comparison

  Similar to Singapore, but needs to diversify supply sources

  Risks

  Global economic slowdown, weakening domestic growth momentum

• India (Macro/Energy)

  Beneficiary

  Strengths

  Solar panel manufacturing potential, launched deep-sea exploration, huge nuclear expansion plan

  Weaknesses

  Current account and fiscal deficit deterioration, moderate energy efficiency

  Comparison

  Huge potential in green technology exports

  Risks

  Double deficit widening, inflation pressure

Key data

• China 2026 GDP Growth Forecast4.5%Raised 0.1 percentage points, previously 4.4%
• Australia 2027 GDP Growth Forecast1.7%Lowered 0.4 percentage points
• Hong Kong 2026 GDP Growth Forecast4.8%Significantly raised, previously 3.3%
• Indonesia Central Bank 2026 Rate Hike Expectation50bpTwo hikes of 25bp in May and June respectively, final value reaches 5.25%
• Philippines Central Bank 2026 Additional Rate Hike Expectation75bpPreviously expected 25bp, total hike amount increased
• China 2024 EV Penetration Rate48%Reflects progress in electrification of transport in energy mix diversification
• Brent Crude Price Assumption98.4 USD/barrel (2026)Assumed $81.1/barrel for 2027

Impact & implications

The report believes energy security demands will bring structural investment and trade opportunities to Asia. First, capital expenditure on domestic oil/gas exploration, renewable energy, nuclear energy, energy storage, and smart grids will increase. Second, green technology exports (e.g., China's EVs, photovoltaic cells, Japan/Korea's advanced batteries) will benefit. Third, LNG (Malaysia, Australia) and critical mineral export volumes are expected to grow. For investors, need to pay attention to policy tilt in energy transition of various countries and performance of leading enterprises in related industries, while warning of inflation and exchange rate risks in economies with high import dependency and insufficient reserves.

Risks

• Closure of Strait of Hormuz extends causing strategic reserves to be exhausted
• Further deterioration of Middle East geopolitical situation
• Global economic slowdown suppresses energy demand
• Technical bottlenecks or cost increases during energy transition process

What to watch

• Interest rate hike paths of central banks in each country (Indonesia, Philippines, South Korea, Taiwan)
• Progress of Middle East situation and navigation situation in Strait of Hormuz
• Implementation of targets for non-fossil energy proportion in Asian countries
• Changes in trade flows of critical minerals and LNG