Without any diplomatic breakthrough, the US-Iran conflict could escalate yet again, with Iran threatening to intensify attacks on Gulf energy infrastructure while maintaining its chokehold on the Strait of Hormuz to apply economic pressure on American interests. Given Asia's high dependence on Middle East crude and natural gas, further production capacity destruction risks triggering fuel shortages and soaring prices that hurt Asian oil refiners and utilities.

In Asian credit markets, the energy and utilities sectors are the most exposed and have been the worst hit, with average spreads rising by between 20-30bps year-to-date. Even integrated oil companies with exploration and production operations could be pressured if they are unable to hike retail prices or obtain more subsidies. Both India and Indonesia have seen their currencies hit record lows while rates are bumping up, suggesting little fiscal space for additional fuel subsidies. Meanwhile, Asian jet fuel stocks have become so scarce that flights are being cut, while Asian countries are rushing to secure LNG feedstock for power generation. Asian credit could see more wobbles if energy scarcity generates spillovers to other sectors.

DBS Aggregate Credit Spread or DACS indices show the aggregate credit spread, weighted by market capitalization and modified duration, for Asian corporate USD-denominated straight bonds. The higher is the DACS, the higher is the additional yield that can be earned in credit, and the higher is the perception of credit risks in markets.

Our first visual shows the notional outstanding of bonds from five Asian economies that comprise the Asia ex-Japan (AXJ) DACS index. These five economies are China, Hong Kong, Korea, India and Indonesia.

The second visual shows the notional outstanding split into industry sectors for the aggregate AXJ DACS index, and DACS indices for each of the five economies. Individual economies can be selected via the dropdown.

Our last visual illustrates the DACS index readings over time for AXJ or an individual economy. It is also possible to drill into the constituent sectors of the DACS indices using the second dropdown. Such sectoral DACS indices are shown on an individual economy basis when data is sufficient, and on an aggregated AXJ basis when otherwise.