Asia FX: Divergent paths under Hormuz scenarios – MUFG
MUFG economists Lin Li, Michael Wan, Lloyd Chan and Khang Sek Lee outline a base case where the reopening of the Strait of Hormuz by end‑May eases pressures on Asian currencies. They see Asia growth softening near term but stabilizing in H2 2026, with inflation contained and most central banks keeping neutral‑accommodative stances. They also sketch an adverse scenario with broad Asia FX depreciation.
Base and adverse scenarios for Asia FX
"A base case, where the Iran war and the Hormuz disruption unwind approaching end of May, is our core case. Asia growth softens slightly in near term but stabilizes into 2H2026 as declining energy prices ease the drag on current account, corporate margins and real income. Inflation will remain largely contained and allows most central banks to maintain their neutral-accommodative stance."
"Iran war has exerted significant pressure on Asia’s net energy‑importing currencies, with PHP, INR, THB and IDR depreciating most against the dollar since late February. However, in our base case, while reopening of the Strait of Hormuz and the associated decline in oil prices would unwind some pressures, we expect a divergent performance across Asian currencies, rather than a unanimous rebound in remaining Q2."
"Under the Adverse Scenario transit the Strait of Hormuz, over time, higher energy costs would worsen the terms of trade, pressure on trade balance, and supply shortages would intensify and weigh on industrial activity and overall economy. A prolonged blockade of the Strait of Hormuz brings the risks of recessions for Asian economies, causing capital outflow, creating pressure for significant pressure. In the Severe scenario, we expect a broad base depreciation among Asian currencies, with some like KRW to depreciate more than 8%, and INR and PHP to depreciate more than 5%, and a relatively mild 3% depreciation for CNY against the dollar."
(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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Iran claims U.S. military forces have significantly withdrawn from sea, six ships attacked in Hormuz in one day, Houthi forces declare Saudi Aramco oil facilities as "legitimate targets"
The Iranian Navy Deputy Commander stated on Monday that U.S. military vessels, including destroyers and aircraft carriers, have significantly withdrawn. On the same day, the Iranian Foreign Ministry stated that Iran is reviewing the U.S. proposals, but the conditions for reopening the Strait of Hormuz remain unchanged. According to reports, with the rotation of U.S. aircraft carriers, only the USS Washington is currently deployed in the Middle East. As of last Sunday, a total of 24 vessels were attacked in the Strait of Hormuz and surrounding waters within two weeks, marking the most severe wave of incidents since the onset of the Iran conflict—far surpassing the previous two-week peak of 13 ships. Oil exports through the strait have dropped by more than 80% compared to the average daily level in September.
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