A prolonged disruption to shipping through the Strait of Hormuz could place significant pressure on supply chains across the Asia-Pacific region, with chemical manufacturers facing the highest exposure to energy market and supply chain risks, according to a new report from Moody’s Ratings.
The report assessed around 1,900 rated companies across 16 sectors and found that a prolonged Middle East conflict would affect industries unevenly through three transmission channels, including energy markets and supply chains, macro-financial conditions, and geopolitical and security risks.
From a global perspective, airlines, chemicals and building products were identified as the sectors with the most highly negative exposure.
Closer to home, Moody’s said the chemicals sector is particularly vulnerable in the Asia-Pacific region, where production relies heavily on Middle Eastern oil and oil-derived naphtha feedstocks.
Higher energy costs, supply chain constraints, inflation in oil-based inputs and inefficient capacity utilisation due to supply disruptions would put pressure on margins and operations across the sector.
However, according to Moody’s, approximately 80 percent of rated Asia-Pacific chemicals companies are investment grade, providing them with somewhat greater financial resilience than peers in other regions should financing conditions deteriorate.
The ratings agency’s central scenario assumes a prolonged and significant disruption to transportation through the Strait of Hormuz extending through the Northern Hemisphere autumn, with Brent crude prices averaging between US$90 and US$110 per barrel for much of the year.
The findings highlight the interconnected nature of global supply chains. Even where organisations do not source directly from the Middle East, they remain exposed to higher energy prices, increased freight costs and supplier cost increases flowing through international manufacturing and logistics networks.
Beyond chemicals, Moody’s found that sectors with substantial energy use, inflexible cost structures and limited pricing power face the greatest exposure to a prolonged disruption.
Airlines were identified as one of the most exposed industries because of rising jet fuel costs.
One-quarter of rated airline companies were assessed as having highly negative overall exposure, while the remainder were classified as moderately negatively exposed.
Sustained fuel price increases would weigh on profitability and could increase passenger and freight transport costs, the report said.
While building products companies were among the three most highly exposed sectors globally, the majority faced moderately negative rather than highly negative exposure overall.
Higher oil prices could increase input costs for energy-intensive products such as paint and asphalt while also driving up transportation expenses. At the same time, weaker economic conditions could weigh on construction activity and demand.
A further 13 sectors were classified as moderately negatively exposed, including manufacturing, metals and mining, consumer products, retail and apparel, paper and packaging, hospitality, media, trading companies, transportation, protein and agriculture, automotive manufacturing, REITs and real estate, and construction and homebuilding.
Across these industries, higher costs for energy, production, transportation and other inputs are expected to compress profitability, particularly for companies with lower pricing power.
The report also highlighted the importance of financial resilience.
Moody’s assessed approximately 3,400 rated non-financial companies globally and found that short-term refinancing needs and weak liquidity could create additional risks if a prolonged conflict triggers greater instability in financial markets.
When operational and refinancing risks were assessed together, Moody’s found that around 70 percent of companies would face either highly negative or moderately negative exposure under a prolonged disruption scenario.
