Over the last decade, Asian supply chains have undergone profound shifts as companies sought to reduce dependence on China, diversifying manufacturing to countries like Vietnam, India, and Mexico. Yet, a newer and significant corridor is emerging—linking Asia to the Middle East in what some describe as a modern-day “Silicon Road.” This corridor represents not only a strategic rerouting of trade and investment but also a deepening economic integration focused on the Gulf states, which are channeling their vast oil revenues into diversifying economies and fostering innovation in sectors such as electric vehicles and artificial intelligence.
Asian firms are increasingly drawn toward the dynamic markets of Saudi Arabia, the United Arab Emirates, Qatar, and others in the region, attracted by the colossal investment plans spearheaded by Saudi Crown Prince Mohammed bin Salman, whose vision for economic transformation will see the injection of some $2 trillion into infrastructure, technology, and energy projects. This subsidy of traditional oil wealth into future-facing industries has attracted top executives and corporate bankers from across Asia, including Seoul, Shanghai, Taipei, and Mumbai, as well as financial players from London and Singapore.
Data from corporate banking studies reveal that the Middle East is becoming an increasingly important partner for Asian businesses. South Korean conglomerates have been prominent players, with Hyundai building nuclear reactors in the UAE and Samsung involved in iconic projects like Dubai’s Burj Khalifa. Taiwanese, Indian, Chinese, and Hong Kong firms have also steadily increased their banking activities linked to the Gulf region.
The business appetite dovetails with geopolitical realities. Since the outbreak of renewed conflict between Israel and Iran, marked by attacks on shared gas fields and retaliatory strikes, concerns have mounted around the region’s energy security and shipping routes, notably the Strait of Hormuz. This narrow maritime passage is critical, serving as the conduit for nearly 21 million barrels per day of crude oil—approximately 21% of global consumption—and about 20% of global liquefied natural gas (LNG) trade.
While Israeli-Iranian hostilities have yet to cause a shutdown, fears loom that escalation could threaten this vital artery. Any closure or disruption of the Strait would have far-reaching economic consequences, especially for energy importers like India, which relies heavily on crude oil and LNG transported via this route. Analysts warn that a blockade could lead to a sharp spike in oil and LNG prices, potentially sending crude above $120 a barrel, which would reverberate globally through elevated inflation and slower economic growth. This risk is accentuated as alternative routes for LNG do not exist, and while oil can be rerouted via pipelines like Saudi Arabia’s East-West pipeline or the UAE’s Abu Dhabi-Fujairah line, these alternatives are either capacity-constrained or vulnerable to security threats such as attacks by Houthi rebels on Red Sea shipping lanes.
Despite these risks, several energy and maritime experts remain sceptical that Iran would actually follow through on blocking the Strait. Several strategic and economic pressures, including the influence of China— the largest importer of both Iranian and regional crude—make such a move highly unlikely. Furthermore, significant fallback infrastructure in the Gulf can partly mitigate a stoppage, and the threat has been issued repeatedly without action in past years.
In energy markets, Brent crude has surged about 20% during June, the most sizeable monthly increase since 2020, reflecting investor jitters prompted by the Middle East conflict. Yet, stocks globally, including major indices like the S&P 500, remain resilient near record highs amid ongoing geopolitical and trade tensions. This resilience highlights a pattern where markets absorb immediate shocks but then reassess longer-term economic impacts. Still, sectors like airlines have suffered, while energy and defence stocks have benefited from rising energy prices and heightened security concerns. Asian buyers, particularly vulnerable to LNG supply disruptions, have already felt price pressures, with spot LNG prices jumping around 11%.
Meanwhile, Qatar—home to the world’s largest LNG reservoir—took emergency steps to meet with energy majors to assess risks amid Israeli strikes on the shared gas field with Iran. QatarEnergy cautioned tankers to delay entering the Gulf until closer to loading time, signalling the precariousness of supply chains under the current conflict dynamics.
Financially, Asian firms increasingly lean on their local banks or regional institutions like Singapore’s DBS Group for working capital tied to Middle Eastern ventures, a shift that could challenge the dominance of longstanding European banking powerhouses in the region’s trade finance.
While the unfolding Israeli-Iranian tensions present uncertainties, the strategic and economic momentum behind the Asia-Middle East corridor appears robust. Unless hostilities intensify dramatically to the point of crippling the Strait of Hormuz, the so-called Silicon Road promises to grow as a significant trade and investment corridor, underpinning a shifting global economic map where the Gulf’s petro-capital fuels a future that transcends oil.
Source: Noah Wire Services
