Iran War Puts Taiwan Risks in the Spotlight

The Iran war and the blockade of the Strait of Hormuz highlight broader risks to tech-heavy global portfolios heavily invested in artificial intelligence: Taiwan.

An invasion by China would not only affect companies like Taiwan Semiconductor Manufacturing Co. (TSMC), but also disrupt the global economy. (Photo: 曾 成訓 Flickr) 

Beijing claims sovereignty over the island and has said it intends to unify it with the mainland, by force if necessary, making Taiwan a key geopolitical flashpoint, Reshma Kapadia reported for Barron’s Daily.

Investors often assume China would avoid military action due to the severe global consequences.

An invasion would not only affect companies like Taiwan Semiconductor Manufacturing Co. (TSMC), which produces more than 90% of advanced semiconductors, but also disrupt the global economy.

The Iran war underscores the vulnerability of global chokepoints and the ripple effects of geopolitical conflict.

About one-fifth of the world’s oil passes through the Strait of Hormuz, while Taiwan accounts for roughly three-quarters of global chip foundry revenue and hosts companies essential to modern electronics.

While the International Energy Agency (IEA) released 400 million barrels of oil reserves to help offset the impact of the Hormuz disruption, no comparable stockpile exists for semiconductors.

China’s potential economic leverage could therefore have far-reaching consequences, far beyond those seen in the Iran conflict, Hoover Institution fellow Eyck Freymann noted.

Taiwan has at least three months’ worth of oil stockpiled. It has also ramped up coal-fired power generation—about 40% of its capacity is typically idle—sourced coal from Indonesia and Australia, and is strengthening supply resilience by improving rare-earth recycling and securing helium supplies from sources outside Qatar.