With events still unfolding, regional oil and gas producers are being forced to reduce production and declare force majeure at several facilities, while logistical difficulties in exporting crude oil and natural gas persist amid the closure of the Strait of Hormuz.
Among all global consumers, Asian countries stand to bear the greatest impact from the region's energy disruptions. Across the continent, many states rely heavily on the Middle East to secure substantial shares of their oil and liquefied natural gas (LNG) needs.
In response to the worsening crisis, Asian governments have rolled out a package of immediate measures, including placing oil and gas reserves on standby and turning to spot markets to secure additional shipments from alternative suppliers. Some countries, notably Taiwan, have also left open the option of reverting to coal to help stabilize domestic electricity grids.
More broadly, the unfolding crisis is likely to yield critical lessons for Asian consumers about the urgency of accelerating domestic energy-transition programs and broadening the base of oil and natural gas suppliers, both to meet future market needs and to stabilize supply during periods of disruption.
A Major Dilemma
Since the beginning of the past decade, oil and natural gas markets have grown increasingly hostage to escalating geopolitical risks, rather than being driven solely by supply and demand fundamentals. The world, and Europe in particular, experienced a sudden energy shock when the Russia-Ukraine war erupted in February 2022, an event that subsequently reshaped the patterns of global energy trade. Today, the world finds itself on the brink of yet another severe energy crisis, following the outbreak of military hostilities in the Middle East on February 28 between Iran on one side and the United States and Israel on the other.
Unlike its predecessor, the current crisis could prove even more severe and more disruptive to global economies and agro-industrial supply chains, particularly if the closure of the Strait of Hormuz persists for a prolonged period. In such a scenario, major consumption markets around the world—and particularly in Asia—could face significant shortfalls in oil and natural gas supplies that cannot be fully compensated by alternative sources. Regional producers have already been forced to scale back output while facing serious obstacles in exporting crude and gas through the Hormuz shipping lane.
A prolonged disruption of export flows through the strait would send oil and gas prices sharply higher. Goldman Sachs estimates that Brent crude could surpass $100 per barrel for several weeks, while spot LNG prices in Asia could reach around $25 per million British thermal units—a 130% increase over pre-war levels.
Asian countries may be more exposed than any other group of global consumers to the consequences of a prolonged disruption in Middle Eastern oil and natural gas supplies. Each year, Asian nations source between 30% and 95% of their total oil imports from the region, and between 10% and 57% of their LNG imports. Any shortfall in these volumes would weaken market performance and dampen economic activity across the continent.
Response Options
As tensions in the Middle East have escalated in recent weeks, Asian governments have moved swiftly to adopt immediate measures in response to the intensifying energy crisis. Four principal types of response have emerged:
1- Managing domestic supply:
Across the region, governments including China, India, Thailand, and South Korea have moved quickly to reassure markets that oil and natural gas reserves are sufficient to meet domestic consumption for periods ranging from one month to a full year, thereby cushioning the short-term impact of the crisis. Japan has announced that its stockpiles are adequate to meet domestic market needs for 254 days, even in the event of a complete interruption of Middle Eastern oil supplies to Japanese refineries.
China appears relatively well positioned compared with many of its neighbors. According to satellite-based energy analytics firm Kayrros, Chinese state facilities and private refineries reportedly held 1.39 billion barrels of oil reserves as of March 2, sufficient to cover 220 days of domestic crude consumption at 2025 demand levels. An additional 42 million barrels of Iranian crude are reported to have been stored aboard tankers near Asian coastlines as of late January—reserves Beijing could potentially draw upon to offset disruptions to Iranian oil flows into Chinese refineries.
Reinforcing domestic energy security, several Asian governments—notably China, Vietnam, and Indonesia—have prioritized channeling locally produced oil, natural gas, and fuel toward domestic markets rather than exporting them. Other countries are likely to follow suit to protect domestic supply and reduce exposure to inbound disruptions.
2- Searching for alternative suppliers:
Several Asian countries are preparing to compensate for disruptions in Middle Eastern energy supplies by sourcing replacement shipments of oil and natural gas through the spot market—a costlier path, not only because of the sharp rise in energy prices since the first week of the war, but also because of intense competition among Asian consumers for available spot cargoes. Indonesia has not ruled out importing U.S. crude oil to offset any potential domestic shortfall. India is moving closer to resuming Russian oil imports without political friction, having received a U.S. waiver permitting purchases of Russian oil until April 4—a significant lifeline for market stability after New Delhi's imports of Russian oil had begun to decline since January under U.S. pressure to curtail energy trade with Moscow.
On the LNG front, several Asian countries, including Japan, Taiwan, Bangladesh, and Pakistan, are considering purchases of additional spot cargoes should the war persist. South Korea has proposed coordinating with alternative suppliers such as the United States and Australia to advance LNG delivery dates or align shipping schedules with neighboring markets. The regional energy crisis, in any case, is likely to benefit oil and LNG producers outside the Middle East, offering them an opening to enter growing Asian markets and fill the emerging demand gap while capturing higher margins at current elevated prices. American companies Venture Global and Cheniere Energy are already working to expand LNG production capacity at their Texas and Louisiana facilities in anticipation of greater Asian demand. Developments of this kind may also open the door for Russian LNG companies to gain a foothold in promising Asian markets such as India, Thailand, the Philippines, and others.
3- Shifting to alternative energy sources:
Within weeks of the Russia-Ukraine war's outbreak in February 2022, coal was reintroduced as a stopgap measure to supply European consumers with electricity, heating, and industrial energy during the continent's energy crisis. A similar dynamic may now be playing out in Asia. The current crisis raises the likelihood that Asian governments will lean on their existing coal-based infrastructure in the short to medium term, even where doing so requires stepping back from ambitious environmental and climate commitments.
Coal, in fact, was already firmly embedded in many Asian energy mixes long before the Iran conflict. In 2024, it accounted for 49.2% of total energy consumption across the Asia-Pacific region. Dependence is particularly acute in electricity generation: coal powered 57.7% of China's total electricity output that year and 74.7% of India's. Taiwan has not ruled out coal-fired power generation as a last resort to prevent factory shutdowns or electricity shortages, and other countries may follow. The net effect would be a further deferral of coal phase-out timelines and an extended reliance on the fuel across the region.
4- Managing energy demand:
Electricity rationing, load shifting, and reducing refinery operating rates represent additional tools available to Asian governments for moderating demand during the current period.
Some gas distribution companies in Asia have already begun curbing crude supplies to certain industrial sectors in India and Pakistan in anticipation of declining shipments from the Middle East. Refineries with heavy exposure to Middle Eastern supply chains may also reduce production by between 5% and 20%, according to preliminary estimates.
At the same time, several governments—including Japan, South Korea, and Malaysia—are preparing precautionary consumer-protection measures such as energy subsidies, fuel price caps, and eased import restrictions. If oil and gas prices remain elevated for a sustained period, however, many Asian countries with limited fiscal space will struggle to maintain open-ended subsidies. It is against that backdrop that several nations, including India and Pakistan, are already revisiting fuel and electricity pricing. India has raised liquefied petroleum gas (LPG) prices by 7%, while Pakistan increased prices for high-grade gasoline and highway diesel by 20.6% and 19.5%, respectively. Singapore, too, has acknowledged that certain consumer groups may face significant electricity price increases if fuel costs remain elevated for a prolonged period.
Lessons for the Future
The current crisis carries important lessons for Asia's long-term energy security. The risk of supply disruptions combined with price volatility underscores the value of government support for programs that expand clean-energy capacity and energy storage, thereby diversifying the supply base in domestic markets. At the same time, some governments may delay earlier plans to phase out coal in the near term in order to preserve additional reserve capacity for future emergencies.
Supplier diversification in oil and natural gas is also set to become a strategic priority across the continent. Its importance has been underlined by the region's acute vulnerability to disruptions and price swings concentrated in a single source region.
The latest crisis may further prompt Asian governments to forge a new architecture of energy alliances and partnerships—one that encompasses expanded cross-border electricity interconnections, deeper integration of regional oil and gas pipeline networks, and fresh logistical ties with producers outside the Middle East.
In conclusion, mounting geopolitical risks are reshaping the global energy landscape, with implications that extend well beyond Asia. The emerging order will increasingly rest on diversified trade partnerships and energy suppliers, as markets seek to reduce risk and limit volatility. These shifts also reinforce the case for a strategic transition toward domestic renewable energy capacity, alongside stronger reserve capabilities for oil and natural gas storage. Together, such measures would enhance the resilience of national energy systems and support the stability of electricity networks in the face of future shocks.
*The writer is the head of Energy Studies Program at Future for Advanced Research & Studies (FARAS).
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