Iran oil shock stirs memories of 1997 Asian Financial Crisis — but here’s why history may not repeat itself in Oil & Companies News 14/04/2026 A month into the worst oil supply disruption since the 1970s Arab embargo, the economic pain spreading across Asia is reviving an uncomfortable question: Could this be 1997 all over again? The parallels are hard to ignore. Asian currencies are under pressure, fueling the risk of capital outflows. Spiking energy costs have pushed governments to roll out emergency measures, while central banks are drawing down foreign exchange reserves. In Thailand, policymakers have moved to ration gasoline. Meanwhile, surging pump prices in the Philippines prompted the government to declare a national emergency. Across the region, the widening trade deficits and rising inflation expectations feel reminiscent of the Asian financial crisis that began in 1997. But economists say the similarities may be largely superficial, thanks to more flexible exchange-rate regimes and deeper foreign exchange reserves, which provide a buffer that helps absorb some of the shock. “Crises can take many shapes, and the shape of this [Iran] crisis is entirely different,” said David Lubin, a senior research fellow at Chatham House. The 1997 episode, he noted, was driven by “a toxic mixture of fixed exchange rates, high levels of short-term foreign debt, low levels of foreign exchange reserves, and elevated current account deficits.” “These days, Asian economies – precisely because of the legacy of the late-1990s crisis – are much better protected.” The region’s financial architecture has also “evolved substantially over the past three decades,” with deeper local markets, broader domestic investor bases and far less reliance on short-term foreign funding, said Fesa Wibawa, an investment manager of fixed income at Aberdeen Investments. That, he said, reduces the risk of sudden capital flight and forced deleveraging that defined the 1997 crisis. Financial shock v.s. physical shock The 1997 crisis was a shock to the financial account, where bank inflows dried up. But the ongoing crisis is a shock to the current account, as oil and product inflows have drained, said Brad Setser, senior fellow at the Council on Foreign Relations, a think tank. “One was a financial shock, the other is a physical or supply shock. And for the worst-affected Asian economies, the 97/98 [crisis] was a much bigger shock,” he told CNBC via email. In 1997, Southeast Asian economies had built large amounts of short-term dollar-denominated debt, supported by quasi-fixed exchange rates and dangerously thin reserve cushions. When speculative trades piled in, Thailand, Indonesia, the Philippines and Malaysia were forced to abandon their currency pegs, triggering cascading defaults and deep economic contractions that were worsened by International Monetary Fund austerity programs. The main challenge for Asia in the current crisis is the effective blockade of the Strait of Hormuz, which has choked about one-third of the oil supplies needed for the regional economy. About 10 million barrels per day of the 30 million barrels needed are not going through the artery. Diesel and jet fuel prices have also soared in recent days, with supply shortages rippling across Asia. The reserve buffer South Korea’s foreign exchange reserves stood at over $400 billion as of end-January, according to the U.S. Federal Reserve, a sharp increase from roughly $30 billion to $40 billion during the