Shockwaves Across Asia: The Iran War’s Strategic Fallout

From energy disruptions to alliance tensions, a geographically distant conflict is having immediate consequences across the Indo-Pacific.

M142 High Mobility Artillery Rocket Systems (HIMARS) conduct live-fire missions during Operation Epic Fury in the U.S. Central Command area of responsibility, Feb. 28, 2026.

The Israeli-U.S. military strikes on Iran that began on February 28 have done more than ignite a Middle Eastern war. They have sent shockwaves rolling across Asia, from the Strait of Hormuz to the Sea of Japan, exposing the brittle underpinnings of regional energy systems, straining diplomatic balancing acts, and forcing governments to make hard choices they have long deferred. 

The conflict is, at its core, a distant war for most of Asia. But the consequences are arriving fast and close.

The Strait of Hormuz, effectively closed to tanker traffic since the strikes, is the jugular vein of Asian energy security. 

Japan depends on the Middle East for roughly 95 percent of its oil supplies, with about 70 percent transiting Hormuz. It is drawing on emergency reserves equivalent to 254 days of imports – among the world’s largest stockpiles. But buffer stocks are a finite reprieve, not a solution. Oil still accounts for 34.8 percent of Japan’s primary energy consumption – a legacy of the post-Fukushima retreat from nuclear power that Tokyo has never fully reversed. 

The Nikkei 225 at one point plunged more than 4,200 points in a single session. The yen weakened sharply toward 160 to the dollar, amplifying imported inflation fears. Over 85 percent of Japanese respondents are now concerned about the war’s direct impact on their lives – a remarkable number in a country not party to the conflict.

South Korea – a country that imports nearly every barrel of oil it consumes – is also feeling the effects on its energy security.  Seoul has enacted a historic fuel price cap – the first in over three decades – ordering price controls on petroleum products and threatening fines for price gouging. The move cushions lower-income households but cannot prevent the broader inflationary shock, particularly in the petrochemical industry. South Korea’s KOSPI fell more than 6 percent in the immediate aftermath of the Israeli-U.S. strikes.

For India, the exposure is more acute and more varied. The country imports 88 percent of its crude oil, and roughly half passes through Hormuz. Washington has granted India a 30-day sanctions waiver to resume oil purchases from Russia – a concession that gives Delhi a short-term lifeline while effectively rewarding Moscow with a captive buyer.

But the strait’s closure also threatens 50-60 percent of India’s LNG imports and 80-85 percent of its LPG shipments – the cooking gas on which hundreds of millions of households depend. Stocks of LPG at refiners and distributors are estimated to cover only two to three weeks of demand. India is the world’s second-largest LPG importer after China, and almost all of it comes from Gulf producers Qatar, Saudi Arabia, the United Arab Emirates (UAE), and Kuwait.

The knock-on effects are already rippling through Indian industry. Small steel producers operating on thin margins have warned of production cuts as gas supplies evaporate. Restaurant owners and ceramics and fertilizer entrepreneurs warn of shutdowns. Indian fertilizer plants were already cutting output because Qatar’s LNG – required as a feedstock – had halted production. 

Include energy inputs and feedstock costs together, and nearly half of India’s soil nutrients are physically or economically hostage to the Gulf. A sustained disruption forces a cruel choice on Delhi: expand an already $19 billion fertilizer subsidy, or risk alienating tens of millions of farming households. Hundreds of farmers staged demonstrations in the Indian capital on March 10, with nationwide protests called by farmers’ groups and trade unions to oppose the conflict.

India has built strategic petroleum reserves over recent years but remains below the globally prescribed 90-day standard. Critically, while India has eight LNG import terminals, it has no formal gas strategic reserve – a gap that is now acutely visible.

If the energy crisis is testing economic resilience, the diplomatic fallout is testing political identity. Across Asia, governments that have built their foreign policies around principled multilateralism and rule-of-law rhetoric find themselves caught between alliance obligations and their own stated values.

Japan’s predicament is perhaps the starkest. Tokyo has long built its foreign policy around fierce opposition to unilateral changes to the international order by force – a posture driven in no small part by its anxieties about China’s designs on Taiwan. Yet that same principle sits in obvious tension with Washington’s unilateral decision to strike Iran without consulting its allies. Prime Minister Takaichi Sanae has been notably reluctant to address the contradiction publicly. 

Most immediately, Japan had to scramble to ensure the safety of its citizens in the region. The government confirmed the safety of approximately 200 Japanese nationals in Iran and is preparing contingency evacuations for 7,700 Japanese nationals in neighboring countries if needed. Already, Japan has evacuated over 200 nationals from Qatar to Riyadh by land, with chartered flights home being arranged from Saudi Arabia.

South Korea faces its own version of the bind. President Lee Jae-myung acknowledged publicly that he cannot stop the United States from redeploying Patriot air defense systems stationed on Korean soil to the Middle East. The redeployment is not a catastrophic blow to South Korean deterrence. But it feeds a dangerous perception that Washington is prepared to deprioritize its East Asian allies when its own strategic interests beckon elsewhere.

India’s balancing act is equally fraught. Prime Minister Narendra Modi’s government has condemned Iranian missile strikes on Gulf states but has conspicuously issued no statement on the initial Israeli-U.S. assault. Opposition leaders Rahul Gandhi and Mallikarjun Kharge held demonstrations outside Parliament carrying banners reading “India needs leadership, not silence.” Modi’s visit to Israel shortly before the strikes, where he met Israeli Prime Minister Benjamin Netanyahu, drew criticism from opposition figures who argue it provided tacit approval for the attacks.

The government’s decision to allow three Iranian naval vessels to dock at Indian ports – ships that had participated in India’s MILAN-2026 naval exercise before a U.S. submarine sank the IRIS Dena in the Indian Ocean – has added an explosive layer to the diplomatic tension. External Affairs Minister S. Jaishankar defended the decision as simply “the right thing to do.” But the incident encapsulates India’s dilemma perfectly. Sri Lanka and India are together sheltering 434 Iranian sailors from three vessels targeted or threatened by the U.S. – a human-scale illustration of how the war generates problems that no existing policy framework adequately addresses. 

The Broader Asian Periphery: Austerity and Rationing

Further down the economic food chain, the impacts are more nakedly severe. Bangladesh has ordered university closures and introduced fuel rationing as its energy crisis deepens, resorting to expensive spot-market LNG purchases to bridge the gap. Pakistan has introduced over a dozen austerity measures – cutting the government workforce by half, shifting to a four-day working week, slashing fuel for government vehicles, banning iftar gatherings, and closing schools for two weeks, affecting some 40 million students. 

Governments across Southeast Asia are scrambling to mitigate the fallout. The Philippines, Vietnam, and Thailand source 96 percent, 87 percent, and 74 percent of their oil from the Persian Gulf, respectively. Southeast Asia has spent the past decade growing more reliant on imported fossil fuels even as domestic production declined, a trajectory that now looks strategically reckless.

As the Lowy Institute has noted, countries such as Cambodia, Thailand, and Nepal face compounded vulnerability due to their dependence on both tourism and manufacturing exports. Small Pacific Island states – heavily reliant on imported food, fuel, and tourism income — are among the most exposed of all. 

The Indian airline sector illustrates how vulnerability compounds vulnerability. Air India and IndiGo canceled 64 percent of their scheduled flights to the Middle East, Europe, and North America as of March 10. This is a double blow, since Pakistan already bars Indian carriers from its airspace. Middle East airspace restrictions and Pakistan’s ban together mean Indian airlines have, in effect, nowhere left to reroute.

The Strategic Beneficiaries: China and Russia

Not every Asian actor is simply a victim of this crisis. Analysts estimate that China now holds on the order of a billion barrels of crude in strategic and commercial storage, approaching several months of net import coverage. Electricity already accounts for well over a quarter of China’s final energy use, and that power is generated mainly from domestic coal and rapidly growing renewables. New-energy vehicles are now roughly half of new car sales, the result of deliberate industrial and energy policies designed to curb oil demand as much as to cut emissions. Taken together, a decade of stockpiling, electrification and support for EVs has left Beijing significantly more insulated from oil-price shocks than many of its neighbors. 

Chinese leaders appear content to watch the conflict unfold from the sidelines. Every U.S. missile fired depletes American stockpiles; every month of economic disruption erodes confidence in Washington as a reliable partner. China is actively positioning itself as the more reliable commercial alternative, supplying clean energy technology, solar panels, and EVs to countries now reassessing their dependence on Gulf oil. 

The war has, in a perverse way, accelerated the political case for the very energy transition that China dominates technologically. By instigating this crisis without consulting its allies, Washington risks reinforcing the perception, assiduously cultivated by Beijing, that the United States is today’s biggest source of geopolitical volatility.

China does have its own economic exposure – the Middle East is a key market for Chinese exports including cars, steel, and clean-energy equipment, and a major destination for Chinese infrastructure investment. A wider war that disrupts regional trade would threaten billions in Chinese assets. But the net strategic calculus still favors Beijing. 

Russia, meanwhile, has been handed a different potential windfall in that India urgently needs oil, and Moscow can supply it at a premium, at least temporarily with Washington’s blessing.

The Long Game: Burden-shifting and the East Asian Arms Dynamic

Beyond the immediate crisis lies a longer structural reckoning. The U.S. military is being stretched across multiple theaters – Iran, the Western Hemisphere, and its legacy commitments in East Asia. The redeployment of air defense systems from South Korea is likely a temporary measure, but it is also a signal. Burden-shifting is coming to East Asia whether Tokyo, Seoul, or Taipei want it or not.

Both Japan and South Korea will need to accelerate their own military build-ups – specifically, longer-range stand-off strike capabilities and deeper layered missile defense systems – to hedge against a more self-reliant future. China’s nuclear and naval capabilities have expanded dramatically over the past decade, and Western officials have warned that Beijing may move against Taiwan in the coming years. Some experts assess that Washington’s ability to deter such a move is eroding. Public debate in both Japan and South Korea has lagged behind the strategic implications of a Taiwan contingency.

For North Korea, the war in the Middle East arrives as a validation narrative. The escalating conflict reinforces Pyongyang’s conviction that nuclear weapons are the ultimate guarantor of regime survival. Kim Jong Un can plausibly argue to his generals that a nuclear-armed state does not end up like Iran. The war may open diplomatic windows, but it will not denuclearize North Korea. If anything, it will harden Kim’s resolve.

Structural Vulnerabilities Laid Bare

What the Iran war has done, above all, is stress-test the assumptions on which Asian economic security has rested for decades. Those assumptions – that Hormuz would remain open, that the U.S. security umbrella would remain reliable, that geopolitical risk could be priced in and managed – have been exposed as insufficient.

The deeper challenge for policymakers is managing an increasingly shock-prone world. The Iran war is only the latest in a string of economic disruptions, ranging from COVID-19 and Russia’s invasion of Ukraine to Trump’s tariff war and compounded by intensifying climate shocks. It also underscores the strategic risks of reliance on imported fossil fuels. Yet across much of Asia, the binding constraint remains political, namely the lack of will to reduce that dependence at scale.

The long-term remedy is clear. It requires faster energy diversification, deeper strategic reserves, stronger regional coordination on supply security, and a candid debate about the military self-reliance required as the U.S. security umbrella weakens. Whether this crisis finally drives structural reform, or once again prompts governments to manage the immediate while postponing the structural, will become evident in the months ahead.

For now, Asian governments are doing what governments do in crises. They are patching, rationing, capping, and waiting. The danger is that the Iran war proves not an exceptional shock but a harbinger – one node in an ever-tightening network of geopolitical, climatic, and economic disruptions for which the region is, by and large, still dangerously unprepared.

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The Israeli-U.S. military strikes on Iran that began on February 28 have done more than ignite a Middle Eastern war. They have sent shockwaves rolling across Asia, from the Strait of Hormuz to the Sea of Japan, exposing the brittle underpinnings of regional energy systems, straining diplomatic balancing acts, and forcing governments to make hard choices they have long deferred. 

The conflict is, at its core, a distant war for most of Asia. But the consequences are arriving fast and close.

The Strait of Hormuz, effectively closed to tanker traffic since the strikes, is the jugular vein of Asian energy security. 

Japan depends on the Middle East for roughly 95 percent of its oil supplies, with about 70 percent transiting Hormuz. It is drawing on emergency reserves equivalent to 254 days of imports – among the world’s largest stockpiles. But buffer stocks are a finite reprieve, not a solution. Oil still accounts for 34.8 percent of Japan’s primary energy consumption – a legacy of the post-Fukushima retreat from nuclear power that Tokyo has never fully reversed. 

The Nikkei 225 at one point plunged more than 4,200 points in a single session. The yen weakened sharply toward 160 to the dollar, amplifying imported inflation fears. Over 85 percent of Japanese respondents are now concerned about the war’s direct impact on their lives – a remarkable number in a country not party to the conflict.

South Korea – a country that imports nearly every barrel of oil it consumes – is also feeling the effects on its energy security.  Seoul has enacted a historic fuel price cap – the first in over three decades – ordering price controls on petroleum products and threatening fines for price gouging. The move cushions lower-income households but cannot prevent the broader inflationary shock, particularly in the petrochemical industry. South Korea’s KOSPI fell more than 6 percent in the immediate aftermath of the Israeli-U.S. strikes.

For India, the exposure is more acute and more varied. The country imports 88 percent of its crude oil, and roughly half passes through Hormuz. Washington has granted India a 30-day sanctions waiver to resume oil purchases from Russia – a concession that gives Delhi a short-term lifeline while effectively rewarding Moscow with a captive buyer.

But the strait’s closure also threatens 50-60 percent of India’s LNG imports and 80-85 percent of its LPG shipments – the cooking gas on which hundreds of millions of households depend. Stocks of LPG at refiners and distributors are estimated to cover only two to three weeks of demand. India is the world’s second-largest LPG importer after China, and almost all of it comes from Gulf producers Qatar, Saudi Arabia, the United Arab Emirates (UAE), and Kuwait.

The knock-on effects are already rippling through Indian industry. Small steel producers operating on thin margins have warned of production cuts as gas supplies evaporate. Restaurant owners and ceramics and fertilizer entrepreneurs warn of shutdowns. Indian fertilizer plants were already cutting output because Qatar’s LNG – required as a feedstock – had halted production. 

Include energy inputs and feedstock costs together, and nearly half of India’s soil nutrients are physically or economically hostage to the Gulf. A sustained disruption forces a cruel choice on Delhi: expand an already $19 billion fertilizer subsidy, or risk alienating tens of millions of farming households. Hundreds of farmers staged demonstrations in the Indian capital on March 10, with nationwide protests called by farmers’ groups and trade unions to oppose the conflict.

India has built strategic petroleum reserves over recent years but remains below the globally prescribed 90-day standard. Critically, while India has eight LNG import terminals, it has no formal gas strategic reserve – a gap that is now acutely visible.

If the energy crisis is testing economic resilience, the diplomatic fallout is testing political identity. Across Asia, governments that have built their foreign policies around principled multilateralism and rule-of-law rhetoric find themselves caught between alliance obligations and their own stated values.

Japan’s predicament is perhaps the starkest. Tokyo has long built its foreign policy around fierce opposition to unilateral changes to the international order by force – a posture driven in no small part by its anxieties about China’s designs on Taiwan. Yet that same principle sits in obvious tension with Washington’s unilateral decision to strike Iran without consulting its allies. Prime Minister Takaichi Sanae has been notably reluctant to address the contradiction publicly. 

Most immediately, Japan had to scramble to ensure the safety of its citizens in the region. The government confirmed the safety of approximately 200 Japanese nationals in Iran and is preparing contingency evacuations for 7,700 Japanese nationals in neighboring countries if needed. Already, Japan has evacuated over 200 nationals from Qatar to Riyadh by land, with chartered flights home being arranged from Saudi Arabia.

South Korea faces its own version of the bind. President Lee Jae-myung acknowledged publicly that he cannot stop the United States from redeploying Patriot air defense systems stationed on Korean soil to the Middle East. The redeployment is not a catastrophic blow to South Korean deterrence. But it feeds a dangerous perception that Washington is prepared to deprioritize its East Asian allies when its own strategic interests beckon elsewhere.

India’s balancing act is equally fraught. Prime Minister Narendra Modi’s government has condemned Iranian missile strikes on Gulf states but has conspicuously issued no statement on the initial Israeli-U.S. assault. Opposition leaders Rahul Gandhi and Mallikarjun Kharge held demonstrations outside Parliament carrying banners reading “India needs leadership, not silence.” Modi’s visit to Israel shortly before the strikes, where he met Israeli Prime Minister Benjamin Netanyahu, drew criticism from opposition figures who argue it provided tacit approval for the attacks.

The government’s decision to allow three Iranian naval vessels to dock at Indian ports – ships that had participated in India’s MILAN-2026 naval exercise before a U.S. submarine sank the IRIS Dena in the Indian Ocean – has added an explosive layer to the diplomatic tension. External Affairs Minister S. Jaishankar defended the decision as simply “the right thing to do.” But the incident encapsulates India’s dilemma perfectly. Sri Lanka and India are together sheltering 434 Iranian sailors from three vessels targeted or threatened by the U.S. – a human-scale illustration of how the war generates problems that no existing policy framework adequately addresses. 

The Broader Asian Periphery: Austerity and Rationing

Further down the economic food chain, the impacts are more nakedly severe. Bangladesh has ordered university closures and introduced fuel rationing as its energy crisis deepens, resorting to expensive spot-market LNG purchases to bridge the gap. Pakistan has introduced over a dozen austerity measures – cutting the government workforce by half, shifting to a four-day working week, slashing fuel for government vehicles, banning iftar gatherings, and closing schools for two weeks, affecting some 40 million students. 

Governments across Southeast Asia are scrambling to mitigate the fallout. The Philippines, Vietnam, and Thailand source 96 percent, 87 percent, and 74 percent of their oil from the Persian Gulf, respectively. Southeast Asia has spent the past decade growing more reliant on imported fossil fuels even as domestic production declined, a trajectory that now looks strategically reckless.

As the Lowy Institute has noted, countries such as Cambodia, Thailand, and Nepal face compounded vulnerability due to their dependence on both tourism and manufacturing exports. Small Pacific Island states – heavily reliant on imported food, fuel, and tourism income — are among the most exposed of all. 

The Indian airline sector illustrates how vulnerability compounds vulnerability. Air India and IndiGo canceled 64 percent of their scheduled flights to the Middle East, Europe, and North America as of March 10. This is a double blow, since Pakistan already bars Indian carriers from its airspace. Middle East airspace restrictions and Pakistan’s ban together mean Indian airlines have, in effect, nowhere left to reroute.

The Strategic Beneficiaries: China and Russia

Not every Asian actor is simply a victim of this crisis. Analysts estimate that China now holds on the order of a billion barrels of crude in strategic and commercial storage, approaching several months of net import coverage. Electricity already accounts for well over a quarter of China’s final energy use, and that power is generated mainly from domestic coal and rapidly growing renewables. New-energy vehicles are now roughly half of new car sales, the result of deliberate industrial and energy policies designed to curb oil demand as much as to cut emissions. Taken together, a decade of stockpiling, electrification and support for EVs has left Beijing significantly more insulated from oil-price shocks than many of its neighbors. 

Chinese leaders appear content to watch the conflict unfold from the sidelines. Every U.S. missile fired depletes American stockpiles; every month of economic disruption erodes confidence in Washington as a reliable partner. China is actively positioning itself as the more reliable commercial alternative, supplying clean energy technology, solar panels, and EVs to countries now reassessing their dependence on Gulf oil. 

The war has, in a perverse way, accelerated the political case for the very energy transition that China dominates technologically. By instigating this crisis without consulting its allies, Washington risks reinforcing the perception, assiduously cultivated by Beijing, that the United States is today’s biggest source of geopolitical volatility.

China does have its own economic exposure – the Middle East is a key market for Chinese exports including cars, steel, and clean-energy equipment, and a major destination for Chinese infrastructure investment. A wider war that disrupts regional trade would threaten billions in Chinese assets. But the net strategic calculus still favors Beijing. 

Russia, meanwhile, has been handed a different potential windfall in that India urgently needs oil, and Moscow can supply it at a premium, at least temporarily with Washington’s blessing.

The Long Game: Burden-shifting and the East Asian Arms Dynamic

Beyond the immediate crisis lies a longer structural reckoning. The U.S. military is being stretched across multiple theaters – Iran, the Western Hemisphere, and its legacy commitments in East Asia. The redeployment of air defense systems from South Korea is likely a temporary measure, but it is also a signal. Burden-shifting is coming to East Asia whether Tokyo, Seoul, or Taipei want it or not.

Both Japan and South Korea will need to accelerate their own military build-ups – specifically, longer-range stand-off strike capabilities and deeper layered missile defense systems – to hedge against a more self-reliant future. China’s nuclear and naval capabilities have expanded dramatically over the past decade, and Western officials have warned that Beijing may move against Taiwan in the coming years. Some experts assess that Washington’s ability to deter such a move is eroding. Public debate in both Japan and South Korea has lagged behind the strategic implications of a Taiwan contingency.

For North Korea, the war in the Middle East arrives as a validation narrative. The escalating conflict reinforces Pyongyang’s conviction that nuclear weapons are the ultimate guarantor of regime survival. Kim Jong Un can plausibly argue to his generals that a nuclear-armed state does not end up like Iran. The war may open diplomatic windows, but it will not denuclearize North Korea. If anything, it will harden Kim’s resolve.

Structural Vulnerabilities Laid Bare

What the Iran war has done, above all, is stress-test the assumptions on which Asian economic security has rested for decades. Those assumptions – that Hormuz would remain open, that the U.S. security umbrella would remain reliable, that geopolitical risk could be priced in and managed – have been exposed as insufficient.

The deeper challenge for policymakers is managing an increasingly shock-prone world. The Iran war is only the latest in a string of economic disruptions, ranging from COVID-19 and Russia’s invasion of Ukraine to Trump’s tariff war and compounded by intensifying climate shocks. It also underscores the strategic risks of reliance on imported fossil fuels. Yet across much of Asia, the binding constraint remains political, namely the lack of will to reduce that dependence at scale.

The long-term remedy is clear. It requires faster energy diversification, deeper strategic reserves, stronger regional coordination on supply security, and a candid debate about the military self-reliance required as the U.S. security umbrella weakens. Whether this crisis finally drives structural reform, or once again prompts governments to manage the immediate while postponing the structural, will become evident in the months ahead.

For now, Asian governments are doing what governments do in crises. They are patching, rationing, capping, and waiting. The danger is that the Iran war proves not an exceptional shock but a harbinger – one node in an ever-tightening network of geopolitical, climatic, and economic disruptions for which the region is, by and large, still dangerously unprepared.

Dr. John Calabrese teaches international relations at American University. He is also a non-resident Senior Fellow at the Middle East Institute (MEI).

India energy security

Iran War and East Asia

Iran War and South Asia

Iran War and Southeast Asia

Israel-U.S. strikes on Iran

Japan energy security

South Korea energy security

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