Iran war fuels Asia energy crunch as India, Japan, others feel strain
The latest phase of the Iran war is locked on the Strait of Hormuz and critical energy infrastructure. Already, its effects are rippling thousands of miles away in Asia.
Asia is at the front line of the energy crisis, with shortages hitting nearly every country. Roughly a fifth of the world’s oil flows through the Strait of Hormuz, with some 80% going to Asia, according to the International Energy Agency.
As Iran refuses to open the strait, Asia is scrambling to mitigate disruptions and is being forced to take measures reminiscent of COVID-era actions.
Asia is especially susceptible due to its heavy import dependence, weaker currencies and large populations. And the impact has hit households fast.
The conflict has disrupted sectors from air travel and shipping to gas supplies. People are struggling to cook and businesses across the board are bearing the brunt as liquefied petroleum gas imports slow.
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Widespread disruptions have hit South Asia in particular, which is extremely reliant on Middle Eastern oil. India, which imports nearly 90% of its crude and about half its natural gas from abroad and is the world's third-biggest oil importer and consumer, has been left especially vulnerable.
Yesterday, President Donald Trump and Indian Prime Minister Narendra Modi spoke on the phone, their first call since the Feb. 28 war broke out. In a post on X, Prime Minister Modi stressed, "Ensuring that the Strait of Hormuz remains open, secure and accessible is essential for the whole world."
The Strait of Hormuz serves as a conduit for more than 40% of India's crude oil imports.
This week, two tankers bound for India sailed through the strait. Vessels with ties to China, Pakistan and Thailand have also transited successfully, while several other Asian governments are in talks with Tehran to secure passage.
But a lot of these imports are expected to be used for non-power, industrial purposes such as fertilizer production, leaving the public left in the lurch.
In a new move that shows the precariousness of the situation, India’s Reliance Industries, which operates the world's biggest refining facility, reportedly bought 5 million barrels of Iranian oil. The deal marks India's first such purchase since 2019 and comes days after the U.S. temporarily lifted sanctions.
"All our kitchens run on gas and so, they’ve all been hit," Indian hospitality veteran AD Singh told FOX Business. "We have been forced to stop serving several items and shorten our menus, doing our best given what we have. But people are worried and livelihoods are at stake. It’s not a positive feeling," the founder and managing director of the Olive Group of restaurants said.
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It’s a similar story in much of the subcontinent.
Two of Asia’s most advanced economies have also been hit hard. But while South Asia feels it more at the household level, Japan and South Korea are facing a different kind of strain.
The two east Asian nations are being rocked by surging import costs, forcing factories to scale back and governments to tap emergency reserves.
Japan, which imports more than 90% of its oil from the region, has begun tapping strategic reserves. South Korea is weighing reserve releases and emergency support measures.
Unlike India, both countries have larger financial buffers and energy stockpiles, allowing them to cushion the immediate impact even though structural risks remain high.
Strikes are hitting many nations, like India, Bangladesh and the Philippines as frustrations grow. Online rumors are deepening the chaos and prompting panic buying. In a few countries like India, police are being deployed at gas stations.
As Asia grapples with this energy crisis, many countries are now turning back to coal and firewood to offset their gas needs.
Induction cooking equipment is flying off the shelves in LPG-dependent India, and early warning signs are popping up elsewhere in the region. Energy shocks are now showing up on dinner tables as well.
"It’s taking some time to get set on these new ways," AD Singh told FOX Business.
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Japan and South Korea are accelerating plans to boost nuclear energy.
Several Asian countries have also released petrol and diesel from domestic reserves, temporarily loosened fuel standards and stepped up domestic production.
Emergency regulatory steps are beginning to sweep the region, from severe austerity measures in Sri Lanka to strict fuel rationing in Bangladesh.
The Philippines just became the first country to declare a national energy emergency, warning of "an imminent danger of a critically low energy supply." The island imports 98% of its oil from the gulf.
Meanwhile, China just dialed back on planned fuel price hikes in a bid to "reduce the burden" on the population.
Some governments are also weighing stimulus packages and energy-saving campaigns are flooding social media as record-high costs bite household budgets.
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"Any scarcity of essential fuels has a cascading effect across the continent," Singh told FOX Business. "When it comes to food, ingredient prices rise, operation costs increase and business volumes are affected. And with the news all over the place, people are spooked."