The ongoing crisis in the Strait of Hormuz has Southeast Asia in a state of flux, with governments and businesses scrambling to manage the impact of disrupted oil and gas supplies. As the region grapples with the fallout, a closer look at the situation reveals a complex web of challenges, from energy shortages to economic instability. The Strait of Hormuz, a vital artery for global energy trade, has been closed to maritime traffic due to the United States-Israeli war on Iran. This has had a ripple effect across Southeast Asia, where countries are now facing the harsh realities of limited energy reserves and the need to adapt quickly.
One of the most immediate consequences is the shift towards energy conservation and alternative work arrangements. The Philippines, for instance, has opted for a four-day work week in government offices, while Thailand and Vietnam have encouraged remote work and limited travel. These measures are not just about saving energy; they are also a practical response to the uncertainty surrounding the Strait's closure. Myanmar has taken a different approach, imposing alternating driving days, which is a creative yet potentially disruptive solution to managing fuel supply.
The region's reliance on imported oil and gas, much of which passes through the Strait of Hormuz, is a critical factor in this crisis. Southeast Asia holds substantial fossil fuel reserves, but the heavy dependence on imports leaves it vulnerable to supply chain disruptions. According to the US Energy Information Administration, about 84% of the crude oil and 83% of the liquefied natural gas (LNG) that passed through the Strait in 2024 was bound for Asia, with China, India, Japan, and South Korea accounting for nearly 70% of oil shipments. This heavy reliance on imports means that even a temporary closure of the Strait can have a significant impact on the region's energy security.
The supply chain shock has also drawn attention to the region's limited energy reserves. Vietnam, for instance, has announced plans to procure about 4 million barrels of crude oil from non-Middle Eastern countries, but this is equivalent to just six days of consumption for the country. Indonesia, Southeast Asia's largest economy, maintains a fuel reserve of about 21-23 days, while Thailand has reserves for 65 days and the Philippines holds reserves for 50-60 days. These numbers highlight the vulnerability of the region's energy security and the need for more robust emergency stockpiles.
The crisis has also led to direct market interventions by governments in an effort to stabilise fuel prices. Thai Prime Minister Anutin Charnvirakul announced a temporary price cap on diesel, while Vietnam said it had started tapping into its fuel price stabilisation fund. These measures are a preview of what is to come in the region if the Strait remains closed, according to Priyanka Kishore, director and principal economist at Asia Decoded in Singapore. The region's emergency stockpiles are significantly lower than those of their peers in northeast Asia, with Japan holding reserves for 254 days, South Korea for about 208 days, and China for 120 days.
The challenge of replacing dwindling crude oil supplies is just one part of the puzzle. Economies must also supplement petroleum products that come from refining crude oil, such as gasoline, diesel, jet fuel, and petrochemicals. Laos, Cambodia, and Myanmar, which lack or have limited oil refining capacity, are particularly vulnerable. They will be under added stress as Asia's oil refineries slow down and restrictions are placed on petroleum exports to conserve domestic oil supply. Thailand has already moved to ban oil exports, except to Cambodia and Laos, while China, another major regional supplier, has ordered state-owned companies to suspend fuel exports.
The petrochemical industry is also feeling the heat. Companies like Singapore's Aster Chemicals and Energy and Indonesia's PT Chandra Asri Pacific have started declaring force majeure, indicating that they may not be able to fulfil their contractual obligations. This raises the prospect of higher prices and more restrictions placed on oil and gas use across the region. The Economist Intelligence Unit expects global oil prices to average about US$80 per barrel in 2026, which, alongside elevated natural gas prices, will raise inflation and lower growth across much of Asia.
The crisis in the Strait of Hormuz has far-reaching implications for Southeast Asia, and the region is now facing a critical juncture. As the situation unfolds, it will be crucial to monitor the impact on energy prices, economic growth, and the broader geopolitical landscape. The region's ability to adapt and innovate in the face of this crisis will be a key indicator of its resilience and ability to navigate the challenges ahead.
