The Iran war, despite a recent US-Iran deal, is unlikely to immediately restore pre-war energy flows through the Strait of Hormuz, which normally supplies about one-fifth of global oil and LNG needs, largely to Asia. Tamara Henderson, Southeast Asia economist at Bloomberg Economics, noted a "very low chance" of the Strait reverting to its pre-war state, predicting persistent energy disruptions. This conflict highlighted Southeast Asia's over-reliance on energy imports from the Middle East, with 90% of crude oil for countries like the Philippines and Vietnam coming from the region, making the strait's closure a significant disruption [businesstimes.com].
The conflict has served as a "wake-up call" for Southeast Asia's energy sector, exposing major risks and driving a push for diversification away from fossil fuels, as highlighted by an International Energy Agency report. Without sweeping reforms, the region's energy import bill could triple from $80 billion in 2024 to $245 billion by 2035. Positive shifts include a doubling of electric vehicle sales in 2025 to around half a million units, increased interest in nuclear power in countries like Indonesia, Vietnam, and the Philippines, and a boom in rooftop solar installations, particularly in the Philippines, which declared a national energy emergency [barchart.com].
Beyond energy, the war has exposed deeper vulnerabilities in Asia's trade architecture. The closure of the Strait of Hormuz, a crucial transit point for a third of global seaborne fertilizer trade, has led to soaring fertilizer and food prices. India's agricultural exports to Gulf markets have slowed due to increased freight and insurance costs. Singapore, heavily reliant on imported natural gas with over 40% of its LNG from Qatar, also felt significant strain. Experts believe that while transit through the Strait may normalize, the broader fragmentation pressures exposed by the conflict may prove harder to unwind, pushing for structural changes in compliance, risk management, energy transition, and supply chain resilience across Asia [asiatimes.com].
Even with a tentative US-Iran agreement, experts warn that higher prices for gas, groceries, and flights will likely persist due to the prolonged impact on supply chains. Oil prices fell to about $80 a barrel after the deal, compared to over $120 during the conflict and $67 pre-war, but the consumer relief will be gradual. David Ortega, a professor of food economics and policy, noted it could take months for the energy shock to work through the food supply chain and for prices to recede, as 30% of the world's fertilizer passed through the Strait before the war. The disruption has also influenced freight costs and shipping broadly even beyond direct container ship volumes [pbs.org].
Bloomberg Economics forecasts that the oil shock and US tariffs will likely slow real GDP growth in most Southeast Asian economies through the rest of 2026. The GDP of Indonesia, Malaysia, Singapore, and Thailand is expected to moderate year-on-year. Energy costs could push inflation as high as 7% in ASEAN-5 economies if oil prices remain elevated. The strained fiscal situations of countries like Thailand, Malaysia, and the Philippines, with debt-to-GDP ratios around 60%, limit their ability to support growth or buffer households from inflation without further measures like cutting energy consumption or improving fuel efficiency [businesstimes.com].
