Flashpoints | Economy | East Asia | Southeast Asia

Asia’s Energy Triage Amid the Iran War 

The conflict is exposing a hierarchy of energy vulnerability across the Indo-Pacific.

Twelve days into the Iran war, the Strait of Hormuz is effectively closed. Roughly 20 percent of global oil and LNG supply remains offline. The impact is being clearly felt on the other edge of Asia. On March 9, South Korea’s KOSPI plunged 6 percent and Japan’s Nikkei 225 fell more than 5 percent. Brent crude breached $100 a barrel for the first time since Russia’s 2022 invasion of Ukraine. In Manila, the government imposed a four-day workweek – a wartime energy-conservation measure the country has rarely, if ever, resorted to in peacetime.

The pain, though, is not distributed anything like evenly. 

Four economies – China, India, Japan, and South Korea – account for nearly 69 percent of the crude and condensate that normally transits Hormuz. Their capacities to absorb the shock, though, are different.

Start with China, which is bruised but better positioned than almost anyone. Beijing holds an estimated 1.2 billion barrels of onshore crude stockpiles – the world’s largest – enough to cover roughly 108 days of imports at current refinery runs. Oil and gas supply just 4 percent of China’s electricity, a fraction of the 40 to 50 percent share common elsewhere in Asia. And its renewables buildout met around 80 percent of new electricity demand in 2024, a cushion that no other major importer can match.

But here is what makes China’s position potentially more than just a buffer story. Iran announced on March 5 that the Hormuz closure applies only to vessels from the United States, Israel, and their Western allies. Since then, at least two bulk carriers have transited by broadcasting “CHINA OWNER” on their tracking systems, and Reuters has reported that Chinese-Iranian talks on a safe-passage arrangement are underway.

How far does this actually go? An analysis by the Center for Strategic and International Studies (CSIS) published this week urged caution: ship-tracking data so far shows that Chinese vessels have not received reliable assurances, and even vessels with informal arrangements would be taking enormous risks transiting an active warzone. The pattern, in other words, is suggestive but unproven.

If it solidifies, though, the implications are enormous. Chinese-flagged vessels moving through Hormuz while Japanese, South Korean, and Western ships are barred would not be a temporary logistical quirk. It would be the embryo of a two-tier maritime order at the world’s most important energy chokepoint – one where alignment with Beijing confers a tangible supply advantage. Nothing like that has existed in the modern energy system.

At the opposite end of the spectrum, Japan and South Korea face the starkest exposure. Japan sources more than 90 percent of its crude from the Middle East, with about 70 percent transiting Hormuz. South Korea buys 70 percent of its oil from the region. Both hold substantial strategic oil reserves – over 200 days of cover – so crude is manageable in the short term.

LNG is the real problem.

South Korea’s working LNG inventory at import terminals covers roughly nine days of consumption, according to a parliamentary disclosure last week. Japan holds perhaps two to four weeks. These are not strategic reserves; they are operational buffers, and they are draining fast.

The policy response has been swift. South Korean President Lee Jae-myung announced fuel price caps – the first in nearly 30 years – and a 100 trillion won ($68.3 billion) stabilization fund. Japan’s refiners have asked the government to release strategic oil reserves. Both countries are scrambling for emergency spot LNG from Australia, Canada, and the United States. But alternative cargoes take weeks to arrange, and they cannot come close to replacing the volume Qatar alone provides.

Across Southeast Asia, the picture is uneven. Singapore and Thailand are the region’s largest importers of Middle Eastern gas: Qatar supplied 42.5 percent of Singapore’s LNG and 42.69 percent of Thailand’s in 2025. Thailand has suspended crude exports since March 1. The Philippines – which imports nearly all its crude from the Middle East – imposed a four-day government workweek, ordered agencies to cut energy consumption by 10 to 20 percent, and is studying emergency fuel subsidies. And Indonesia, having recently signed a trade deal tilted toward U.S. fossil fuel imports, now faces the irony of deepening its hydrocarbon dependence at precisely the moment the global fossil fuel market is convulsing.

Russia: The Quiet Winner

Who benefits from all this disruption? One answer, uncomfortable but unavoidable, is Moscow.

Russian seaborne oil does not transit Hormuz. It reaches Asia via Baltic, Black Sea, and Pacific routes. With Gulf barrels stranded, India and China have powerful........

© The Diplomat