Tech boom vs oil crisis: Asia’s new economic reality is a warning for the world

Taipei, Taiwan —

In South Korea, a global energy supply crunch has hit hard. Officials have advised energy conservation, cut growth forecasts and warned of fallout from high inflation and 17-year lows in the value of its currency. Yet the nation’s largest companies are raking in record profits, and its stock market is hitting all-time highs.

The contradiction underscores how, in Asia, there are now two economic realities.

The historic oil shock caused by the war in Iran is accelerating a divergence of economic fortunes across the region. One is driven by tech giants and the promises of artificial intelligence. The other is darkened by fuel scarcity and rising prices that threaten a humanitarian crisis.

As the disproportionate impact of oil shortages in Asia widens the divide, economists warn that the phenomenon has significant ramifications for monetary policy, political stability, and future economic growth across the continent – and other parts of the world that rely on it for trade.

“Yes, the economy is booming, the equity market is doing very well, but we see limited wealth effect spilling over to the daily activities happening in the region,” said Benson Wu, a Korea and China economist at Bank of America Merrill Lynch. “I think that is something really troubling many observers.”

The disparity is indicative of growing inequality, exacerbated first by the Covid-19 pandemic, and now the conflict in the Middle East. Shipping via the Strait of Hormuz, through which one-fifth of the world’s crude oil normally flows, has dried up over the past two months, sending oil prices to four-year highs.

Asia, which is heavily reliant on the Middle East for energy, has borne the initial brunt of those higher prices. But the…

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