[MUFG & ING Report] Middle East 'Oil Shock' Scenarios and Global Market Trajectory

Subtitle: The Butterfly Effect of the Hormuz Blockade: The Rate Cut Dilemma and a Shaken Korean Won

Original Report Date: March 2, 2026

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📌 3-Line Summary

- Diverging Scenarios: The market faces a crossroads between a 'swift resolution' within 4-7 days and a 'Forever War' scenario where oil spikes to $100-$140. Currently, the Strait of Hormuz is effectively paralyzed.
- Asian Economy & Currency Crisis: Highly dependent on energy imports, Asian current accounts will deteriorate. The Korean Won (KRW), known for its 'high beta' characteristics, is pinpointed as one of the most vulnerable currencies to external shocks.
- The Rate Cut Dilemma: Surging oil prices will reignite inflation, disrupting the rate-cut plans of global central banks (including the Fed) and triggering a massive flight of capital toward safe havens like the USD and Gold.

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📖 In-Depth Report Analysis

MUFG and ING focus their analysis on global capital flows and the impending policy dilemmas facing central banks. They strongly warn of the fatal ripple effects the Strait of Hormuz blockade will have on Asian equities and exchange rates.

■ 1. Paralyzed Strait of Hormuz and the 'Two Scenarios'

Despite Iran's claims that the strait remains open, shipowners' "wait-and-see" approach has effectively paralyzed traffic through the Strait of Hormuz, a critical chokepoint for 20% of the world's oil. ING presented two scenarios that will dictate the market's future:

- Early Resolution Scenario (within 4-7 days): If military strikes conclude quickly and a de facto ceasefire occurs, the current oil spike will be a temporary blip. The market will shed its short-term 'war premium' and rapidly stabilize.
- Forever War Scenario (Worst-Case): If the US targets regime change, leading to a prolonged asymmetric economic war by Iran, a historic shock to oil supply will occur. Oil could soar to $100-$140 per barrel, triggering a global stock market correction and a flight to bonds.

■ 2. Direct Hit to Asia: The Vulnerable 'Korean Won (KRW)'

If high oil prices persist, energy-import-dependent Asian economies will suffer critical damage. MUFG analyzes that for every $10 rise in oil prices, Asian current accounts deteriorate by about 0.2% to 0.9% of GDP. Among Asian currencies, MUFG identified the Korean Won (KRW), Indian Rupee (INR), and Philippine Peso (PHP) as the most fragile. The Korean Won, in particular, exhibits 'high beta' characteristics—meaning while it rises sharply during global booms, it crashes much steeper than peers during panic-driven external shocks. In contrast, currencies of net energy exporters like the Malaysian Ringgit and the Chinese Yuan are expected to show relative resilience.

■ 3. Inflation Shock and the Central Banks' 'Rate Cut Dilemma'

If oil approaches $90, the Consumer Price Index (CPI) in inflation-sensitive countries (including South Korea) could rise by up to 0.9%p. This throws global central banks into a severe dilemma. The Fed and ECB, which were preparing to cut rates to prevent economic slowdowns, will be unable to easily lower rates due to renewed inflationary pressure. ING describes this as a "supply shock at the worst possible time." Asian central banks are also likely to delay rate cuts or even increase the probability of rate hikes to manage risks.

■ 4. Investment Strategy: Return of the 'King Dollar' and Carry Trade Unwinds

Amidst this turmoil, investment capital is fleeing strictly toward safe havens. The near 25% rally in gold prices this year alone proves this point. In the FX market, broad strength for the US Dollar (USD) is expected. Energy-importing Euro and Asian currencies will weaken, potentially mirroring the dollar surge seen at the outbreak of the Russia-Ukraine war in 2022. Furthermore, ING warns of the unwinding of popular 'carry trades.' As high oil prices jeopardize emerging market economies, investors rushing to pull out funds could trigger a rapid collapse of emerging market currencies.

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💡 StockHub Insight & Comments

The most painful takeaway for South Korean investors from the MUFG and ING reports is the 'fundamental vulnerability of the Korean Won (KRW).' The combination of deteriorating trade balances due to high oil prices and the global flight to safe havens could trigger a vicious cycle: 'Depreciation of the Won → Foreign capital outflow → Domestic stock market decline.'

While we can hope for the short-term early resolution scenario, it is now more necessary than ever to adopt a defensive strategy. Investors should consider increasing their USD cash positions or incorporating traditional safe havens like Gold as a hedge against the worst-case scenario.