THE CIO’S PERSPECTIVE

The military escalation involving the United States, Israel and Iran at the start of the month sent an immediate shock through Asian markets. Because crude flows through the Strait of Hormuz serve Asian demand disproportionately, the economic repercussions were felt first — and most acutely — across the region. Countries heavily reliant on Gulf oil, including the Philippines, Myanmar, Cambodia, Bangladesh and Pakistan, have already introduced severe rationing measures, while others have cut fuel taxes or expanded subsidies in an effort to contain the pass-through to domestic consumers.

Our central scenario remains that of a prolonged oil shock, one that is likely to drive Brent and WTI meaningfully higher from here. Yet, in our view, the market’s focus on oil alone is too narrow. The more enduring disruption may emerge in liquefied natural gas and associated industrial gases, where supply chains are more specialised, substitution is limited, and the downstream implications for global industry could prove both broader and deeper.

That broader risk is now visible in Qatar. As of the time of writing, two of the fourteen production trains and associated downstream chemical units at the QatarEnergy Ras Laffan LNG complex have been seriously damaged, removing 17% of Qatar’s LNG production capacity and 14% of its helium production capacity. Management has indicated that repairs may take between three and five years. This matters not only because Ras Laffan is the largest LNG complex in the world, but because it also represents a critical node in the supply of high-purity helium, reportedly accounting for 65% of South Korean chipmakers’ N6 helium requirements and 69% of Taiwan’s, according to Barclays Bank. Even if hostilities were to cease immediately, restoration would likely be measured in months rather than weeks, with downstream gases such as helium taking longer still to return, given the need for each stage of the process to be tested, certified and sequenced before full operations can resume. For now, the complex remains shut and personnel have been sent home. 

The implications for semiconductors — and, by extension, the global rollout of AI infrastructure — could be substantial. Helium may represent less than 0.1% of the manufacturing cost of a chip, but its functional importance is far greater than its economic weight. It is essential to wafer cooling, photolithography, plasma etching, deposition, contamination control and micro-leak detection across fabrication equipment. At present, there is no practical substitute. TSMC, SK Hynix and Samsung Electronics have all indicated that inventories are sufficient for “a few months”, which analysts broadly interpret as two to six months of supply.

The ramifications extend beyond memory. Micron Technology should be less exposed, given its access to a dedicated Air Liquide facility adjacent to its fab in Boise, Idaho. However, memory alone does not define the AI buildout. Advanced memory must be paired with Nvidia or AMD GPUs, and the most advanced of those chips continue to be manufactured in Taiwan by TSMC. TSMC’s Arizona facility currently produces Nvidia’s Blackwell GPU, which remains well behind the leading edge. As a result, the roughly USD 700 billion of capex planned by hyperscalers in 2026 may yet collide with physical bottlenecks in GPUs and memory, introducing meaningful execution risk into the broader data-centre supply chain. This is particularly relevant given that Nvidia’s Hopper 200 GPU typically requires eight HBM3e chips, while Rubin, the next-generation architecture expected later this year, will require twelve chips based on the HBM4 standard.

Against this backdrop, Korean and Taiwanese chipmakers face a particularly difficult operating environment because of their dependence on specialty gases sourced from Qatar. Chinese semiconductor manufacturers, by contrast, may be somewhat more insulated in their legacy-node businesses, as China sources 54% of its high-grade helium imports from Russia. That share could rise further as the conflict reinforces geopolitical alignment between the two countries. Even so, China remains materially behind the technology frontier. SMIC has only recently begun producing 7nm chips, whereas TSMC is already at 2nm. ChangXin Memory Technologies, China’s most advanced memory producer, is not expected to manufacture HBM3 chips before year-end and remains roughly three years behind SK Hynix.

Helium is not the only concern. We also expect disruption to the global supply of sulphuric acid, used as a leaching reagent in metals processing, and urea, a vital feedstock in fertiliser production. Ras Laffan is the world’s second-largest exporter of both, with an estimated global market share of around 15% in each category, and the site is effectively offline. In that context, India appears particularly vulnerable, given the central importance of fertiliser availability to agricultural output and food security.

Not all consequences are negative. The current shock is likely to strengthen the medium-term case for renewable-energy platforms and for battery manufacturers in particular, whether in electric vehicles or in energy storage systems for data centres. Solar power is now cheaper than coal-fired power in China, creating a clear economic incentive for industrial groups and hyperscale operators to accelerate investment in renewables and storage. That relative attractiveness becomes even stronger as higher oil and coal prices feed through the system. In that respect, it is notable that CATL, the world’s largest battery producer, and Sungrow Power Supply, a leading manufacturer of inverters and energy storage systems, have shown an increasingly positive correlation with the oil price.

At the macroeconomic level, China has again surprised positively. The trade surplus for the first two months of the year rose 21.8% year on year, while profits among industrial companies increased 15.2% over the same period, marking the strongest start to a year since 2018. Electronic manufacturers saw profits rise by more than 200% year on year. That said, the durability of this momentum is now in question. A 50% rise in oil prices during March is likely to compress margins meaningfully across large parts of the industrial economy.

Beijing, for its part, has so far responded with restraint. Petrol prices in China have risen by only 10% to 13%, compared with 68% in Cambodia, 33% in Laos and Vietnam, and 25% in Pakistan. China also enjoys several buffers: strategic reserves of 1.4 billion barrels, equivalent to around four months of consumption; continued access to a large share of Iranian exports; and the ability to bring coal-fired power generation back online if required. According to the Energy Institute’s Statistical Review of World Energy, oil and gas represented 27.2% of China’s primary energy consumption in 2024, against a global average of 54.6%. Given the continued expansion of renewables, that share is likely lower today.

Elsewhere in Asia, the consequences are likely to be more inflationary. Higher oil prices should place renewed pressure on regional currencies and may accelerate the timetable for monetary tightening. Australia has already moved. China remains the exception, with inflation still below the PBoC’s 2% target, at 1.3% in February versus 0.2% in January.

One of the more striking market developments during the month was the behaviour of gold. Rather than serving as a defensive hedge, gold fell 14% from the start of hostilities, with silver down 22%. In our view, this reflects an important change in market structure. Gold has increasingly traded less as a store of value and more as a speculative instrument, particularly since mid-2025, as retail investors using margin financing have become more active alongside central banks. As risk assets sold off in March, leveraged positions in precious metals were also unwound, accelerating the correction. Rumours that certain central banks may need to sell gold reserves to offset higher energy-related fiscal deficits only added to the pressure.

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