Southeast Asia Braces for Energy Crisis as Strait of Hormuz Remains Blocked
Governments and businesses across Southeast Asia are scrambling to mitigate potential energy shortages as the Strait of Hormuz remains closed to maritime traffic, a direct consequence of the ongoing conflict between the United States, Israel, and Iran. The disruption is already triggering economic adjustments, from altered work schedules to direct market intervention.
Immediate Responses: Work Schedules and Price Controls
The impact is being felt across the region. In the Philippines, government offices have shifted to a four-day work week. Thailand and Vietnam are encouraging remote work and reduced travel for officials. Myanmar has implemented an alternating driving day system. These measures aim to curb fuel consumption in the short term.
Governments are as well intervening directly in fuel markets. Thailand’s Prime Minister Anutin Charnvirakul announced a temporary price cap on diesel. Vietnam is utilizing its fuel price stabilization fund, according to state media reports.
Regional Reliance on Middle Eastern Oil
Despite holding fossil fuel reserves, Southeast Asia is heavily reliant on imported oil and gas, a significant portion of which transits the Strait of Hormuz. Data from the US Energy Information Administration indicates that in 2024, approximately 84 percent of crude oil and 83 percent of liquefied natural gas (LNG) passing through the Strait was destined for Asia.
China, India, Japan, and South Korea account for the majority of these shipments, with around 15 percent heading to the rest of Asia. The Philippines, Thailand, Malaysia, and Brunei are particularly vulnerable, importing 60-95 percent of their crude oil needs, according to the Economic Research Institute for ASEAN and East Asia (ERIA).
Seeking Alternative Supplies – A Limited Solution
Vietnam has announced plans to procure approximately 4 million barrels of crude oil from non-Middle Eastern sources. However, this quantity represents only about six days of the country’s consumption, highlighting the difficulty of quickly replacing disrupted supplies.
Indonesia, Southeast Asia’s largest economy, relies on imports for over one-third of its crude oil. Thailand currently holds reserves sufficient for 65 days, with plans to supplement this with an additional 30 days of supply. The Philippines maintains reserves for 50-60 days, primarily in privately owned commercial inventories.
Refining Capacity and Export Restrictions Add to the Strain
Laos, Cambodia, and Myanmar have limited oil refining capacity, relying on exports from Thailand, Vietnam, and Singapore. These nations face increased stress as Asian refineries sluggish down and restrictions are placed on petroleum exports to conserve domestic supplies. Thailand has already banned oil exports, except to Cambodia and Laos, while China has instructed state-owned companies to suspend fuel exports.
Petrochemical companies, including Singapore’s Aster Chemicals and Energy and Indonesia’s PT Chandra Asri Pacific, have declared force majeure, indicating potential inability to meet contractual obligations. Rayong Olefins, a Thai petrochemical firm, has suspended plant operations due to a lack of key raw materials like naphtha and propane.
Economic Outlook: Rising Prices and Potential Recession
The Economist Intelligence Unit anticipates global oil prices to average around US$80 per barrel in 2026, contributing to inflation and slower growth across Asia. Experts suggest the region could face a recession if the situation in the Strait of Hormuz does not improve within weeks.
FAQ
Q: How reliant is Southeast Asia on the Strait of Hormuz?
A: Very reliant. In 2024, 84% of crude oil and 83% of LNG passing through the Strait was bound for Asia.
Q: What are governments doing to address the crisis?
A: Implementing measures like four-day work weeks, encouraging remote work, price caps on fuel, and tapping into stabilization funds.
Q: Are there alternative oil sources?
A: Vietnam is seeking alternative sources, but the quantities are limited and won’t fully offset the disruption.
Q: What is the potential economic impact?
A: Rising inflation, slower economic growth, and potentially a recession if the situation persists.
Did you recognize? Japan holds enough oil reserves to last over 250 days, significantly more than most Southeast Asian nations.
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