Southeast Asian Economies Struggle With Iran War Energy Shock

Southeast Asian economies are struggling to counter an energy shock caused by the Iran war that has disrupted oil supplies and driven up prices [1, 2].

This crisis threatens the regional stability of major oil-importing nations by fueling inflationary pressures and straining national budgets. Because these economies rely heavily on Middle East crude, any disruption to the flow of energy directly impacts industrial productivity and consumer costs.

The conflict, which began in April 2026 ^[3], has constrained oil flows through the Strait of Hormuz [4, 5]. This maritime chokepoint is critical for global energy distribution; currently, 69% of the crude flowing through the strait goes to China, India, Japan, and South Korea ^[6].

Governments in Indonesia, Malaysia, Thailand, and the Philippines are now deploying economic buffers to manage the volatility [1, 2]. These nations entered the crisis following a period of resilient growth recorded in 2025 ^[2]. However, the effectiveness of these buffers is a point of contention among observers.

Some reports suggest the impact remains manageable as economies test their existing financial reserves ^[2]. Other accounts describe a more severe disruption, citing the closure of factories, flagship airlines cutting routes, and citizens queuing for cooking gas ^[7].

The energy shock is primarily driven by the instability in the Middle East, which has limited the availability of liquid flows ^[4]. As crude prices climb, the cost of transportation and manufacturing increases across the region, forcing a balance between maintaining subsidies and controlling inflation [2, 8].