The Strait of Hormuz has long been recognised as a critical node in global energy supply chain. As a key transit route for a substantial share of the world’s seaborne oil trade, traders modelled the risk, navies prepared for it, and governments war-gamed the scenario. But most investors still treated a prolonged disruption as a low-probability event.
Two months into the US-Israel war with Iran, that assumption has collapsed.
The disruption of flows through Hormuz has triggered the most severe oil transport shock in modern history. According to Kpler data estimates, crossings through the Strait fell by more than 90 per cent from pre-conflict levels, while Gulf crude and product exports dropped from roughly 18 million barrels a day in February to around 2.3 million barrels a day in March.1 Cumulative output losses by the end of April were projected at near 790 million barrels.2
The current disruption represents more than a temporary oil price spike. It is a structural shock, one that is prompting a reassessment of supply chains, strategic reserves, refinery systems, geopolitical leverage and the resilience of the global economy.
Why Hormuz Still Matters: From Transit Chokepoint to Supply Shock
Around a quarter of globally traded oil passes through the Strait of Hormuz in normal times. That includes crude from Saudi Arabia, Iraq, Kuwait, the UAE, Qatar and Iran, alongside refined fuels, LPG, condensates and petrochemical feedstocks. Asia absorbs roughly 80 per cent of these flows, making the region particularly exposed.3
Figure 1 Middle East Gulf crude and oil product exports via the Strait of Hormuz, in mb/d
Source: Kpler 4
Notes: Includes crude/co, clean products and dirty petroleum products.
The strategic significance of Hormuz lies not simply in volume, but in concentration. Spare production capacity — additional oil output that can be mobilised quickly to stabilise markets — is also heavily concentrated in the Gulf, where much of the world’s cheapest reserves are located. When the region experiences disruption, both supply and the system’s main shock absorbing capacity are affected simultaneously.
Alternative routes exist, but they are limited. Saudi Arabia can reroute some crude westward via the East-West pipeline to the Red Sea. The UAE can export volumes through Fujairah on the Gulf of Oman. Iraq and Iran possess smaller bypass options. However, these routes cannot replace the scale of normal Hormuz flows.
Supply systems built around uninterrupted circulation face challenges when flows are disrupted. Initially, market actors focused on tanker movements, insurance premiums and freight costs. However, a more fundamental concern soon emerged: when exports stall, production levels must inevitably fall.
Oil wells cannot simply be switched off and on like household appliances. Shut-ins can damage reservoirs, complicate pressure management, overwhelm storage and slow restart timelines. As the closure persisted, a transport shock became a production shock. Gulf crude and liquids output fell by more than 12 – 14.5 million barrels a day from pre-war levels. Countries with limited bypass capacity were most severely affected. Iraq, Kuwait and Qatar were hit particularly hard, while Saudi Arabia and the UAE proved relatively more resilient due to existing alternative infrastructure. 5
This distinction matters because markets can often digest fear more easily than physical shortages. Once actual barrels disappear from supply, inventories draw down rapidly, refiners seek alternative sources, and price spikes become harder to contain.
ASEAN on the Front Line of the Oil Shock
More than 50 countries — including Germany, the UK, Brazil, Nigeria and Australia — gathered in Colombia for the first international summit dedicated to phasing out fossil fuels. Yet as diplomats debate a post-oil future, Southeast Asia is confronting a harsher present reality: its economies remain deeply exposed to oil shocks originating thousands of miles away in the Strait of Hormuz.6
Few regions are more exposed to the Strait of Hormuz disruption than ASEAN. Around a quarter of globally traded oil normally passes through the Strait, making any prolonged disruption immediately relevant for energy-importing Southeast Asia.
While Southeast Asia is often discussed as a growth story or manufacturing hub, it is also an increasingly important net energy-importing region. ASEAN’s combined oil demand is estimated at around 6.5–7 mb/d7, with consumption rising steadily over the past decade as urbanisation, rising vehicle ownership, aviation growth and industrial expansion outpace domestic supply growth. Several member states now face structural import dependence.
For many countries in the bloc, Gulf producers remain essential suppliers of crude oil, LPG and refined petroleum products. Saudi Arabia, the UAE, Kuwait and Qatar have long played a central role in meeting Southeast Asia’s energy needs. That dependence means disruptions in Hormuz are transmitted quickly into ASEAN fuel markets.
This dependence raises concerns not only of quantity but also of quality. Many refineries in Southeast Asia were configured to process medium and heavy sour crudes from the Gulf. These barrels are not easily replaced with lighter crude from the United States or Atlantic Basin producers without reducing efficiency, altering yields or increasing operating costs. In practical terms, ASEAN is not only short of oil during a crisis—it can be short of the right oil.
Refiners across the region have responded by seeking cargoes from the United States, West Africa and Latin America. Yet these alternatives arrive with longer shipping times, higher freight charges and greater competition from other buyers. In practice, refiners either trim utilisation rates or continue operating with technically mismatched and more expensive feedstock, accepting lower efficiency and reduced margins. Asian refiners more broadly faced these pressures as they scrambled for substitute barrels after Gulf flows were disrupted.8
The result is visible in product markets. Diesel, gasoline and jet fuel prices have risen sharply, adding pressure to transport systems, logistics chains and household budgets. For import-dependent economies, a USD 10 rise in crude prices can quickly feed into inflation, current-account balances and subsidy burdens.
Indonesia illustrates the challenge clearly. Southeast Asia’s largest economy consumes roughly 1.6 mb/d of oil but produces less than half that amount domestically, forcing substantial imports of crude and refined fuels. Sustained price increases can widen fiscal burdens or force difficult domestic adjustments. The Philippines faces similar exposure as a highly import-dependent market where fuel costs feed directly into transport and food prices.9
Thailand and Vietnam confront a different but equally serious risk. Thailand consumes around 1.3 mb/d, while Vietnam’s oil demand has risen above 500 kb/d. Both economies are major industrial exporters integrated into regional supply chains. Higher diesel prices raise trucking and shipping costs, while higher petrochemical feedstock prices affect plastics, packaging and manufacturing competitiveness. In Thailand, where tourism is a key economic pillar, higher jet fuel prices also weigh on airlines and travel demand.10
Malaysia and Brunei are hydrocarbon producers, but exporters are not immune. Lower regional refinery availability, freight disruptions and volatility in product markets can still tighten domestic balances. Malaysia must also manage the fiscal consequences of domestic fuel pricing policies when global markets surge.
Singapore occupies a uniquely strategic position. It is one of the world’s largest oil trading, storage, refining and bunkering hubs, with refining capacity of roughly 1.3–1.5 mb/d and one of the busiest marine fuel markets globally. It sits at the centre of ASEAN’s petroleum system. When crude availability tightens or product inventories fall in Singapore, the effects ripple across the region—from shipping costs in Indonesia to jet fuel supply in Thailand and diesel balances in the Philippines.11
There is also a maritime dimension. Southeast Asia lies along the onward route from Hormuz through the Indian Ocean and into the Strait of Malacca, through which an estimated 15–16 mb/d of oil also transits daily. If Gulf disruptions coincide with congestion or security concerns in Malacca, ASEAN economies face a double vulnerability: supply risk at origin and transport risk en route.
The present crisis may therefore revive long-postponed strategic debates in ASEAN capitals. Should the region expand strategic petroleum reserves? Should ASEAN establish stronger emergency fuel-sharing mechanisms? Should governments invest more aggressively in refinery upgrading, storage capacity and pipeline connectivity? Should the bloc accelerate electric mobility, biofuels and renewable power not only for climate reasons, but for import security?
These questions are no longer theoretical. For years, Southeast Asia benefited from relatively reliable maritime energy flows and manageable oil prices. The crisis has exposed the limits of regional insulation, with higher benchmark prices and product tightness transmitted globally even to economies with lower direct dependence on Hormuz flows.
ASEAN’s experience underlines a broader truth: energy security is not measured simply by access to oil, but by access to suitable oil, on time, at predictable cost, through secure sea lanes.
Supply Disruption in the Gulf: Energy Security Implications and Market Impacts for ASEAN
Governments have reached for familiar tools—strategic reserve releases, diplomatic pressure and emergency waivers for sanctioned barrels. But the available buffers are thinner than many assumed.
IEA members agreed to release nearly 400 million barrels from strategic reserves.12 Yet projected cumulative Gulf output losses by late April approached twice that volume. In other words, even a coordinated reserve drawdown cannot fully offset a disruption of this magnitude for long.
There are also quality mismatches. Much of the lost supply is medium sour crude, whereas strategic reserves often contain lighter grades. Geography matters too. Barrels released in Atlantic markets do not instantly solve shortages in Asia. Freight, timing and refinery compatibility all intervene.
Commercial inventories offer only temporary respite. Oil “on the water” may already be committed, stranded or trapped by disrupted shipping lanes.
The key point is stark: the market’s usual adjustment mechanisms—stocks, spare capacity and arbitrage—have all become less effective at the same time.
Modern oil markets are shaped as much by screens as by wells. Futures, swaps and options connect buyers and sellers across time zones and allow hedging against risk. But when physical scarcity intensifies, those financial layers amplify stress.
Volatility in Brent, WTI and gasoil benchmarks has surged. Prompt spreads widened sharply, reflecting immediate scarcity. Option markets tilted aggressively toward calls as traders sought insurance against further upside.
Smaller participants faced rising margin calls and thinning liquidity. Some hedges failed because firms lost access to the physical cargoes that were meant to offset paper positions. In parts of Asia, benchmark pricing systems tied to Dubai crude came under strain, prompting some refiners to seek alternative pricing formulas.
The implication extend beyond commodity markets. Oil benchmarks feed into airline fuel bills, freight rates, inflation expectations and monetary policy assumptions. Disruptions to price discovery mechanisms can therefore transmit energy shocks into the wider economy.
Every oil crisis reshapes competition and strategic alignments across the global energy system, redistributing influence and redefining roles among actors.
Russia has been an accidental beneficiary. Higher benchmark prices and renewed demand for discounted barrels have improved revenues, even if logistical and infrastructure constraints limit export growth.
The United States has also gained market share. Demand for US crude, particularly WTI-linked grades, has risen sharply as Asian buyers seek alternatives. American refiners have benefited from strong margins and rising exports of diesel, jet fuel and LPG.
Yet Washington has also discovered the limits of energy dominance. America may import little Gulf crude directly, but it cannot insulate itself from global prices. Higher pump prices, inflation pressure and market volatility still feed into domestic politics.
Iran, meanwhile, has demonstrated that production volume is not the only source of leverage. Geography itself can be weaponised. Even partial disruption of transit has imposed global costs far beyond Tehran’s share of world output.
The Gulf monarchies face a different dilemma. Their credibility as reliable suppliers depends not just on reserves underground, but on secure routes to market. If Hormuz can no longer be assumed safe, customers will demand diversification.
What Comes Next
Even if a ceasefire emerged tomorrow, the market is unlikely to revert cleanly to the pre-war order.
Insurers will permanently reassess transit risk. Freight premiums for Gulf cargoes may remain elevated well after hostilities subside. Asian importers will seek broader sourcing strategies, relying more heavily on the United States, West Africa, Brazil and other Atlantic Basin suppliers. Governments may hold more refined products—not just crude—in emergency reserves, recognising that shortages at the pump can matter more politically than shortages in storage caverns.
Producers are likely to accelerate pipelines, storage terminals and export routes that bypass Hormuz. Refiners will place greater value on feedstock flexibility: plants able to process multiple crude grades will command a strategic premium.
For Southeast Asia, the next phase may prove transformative.
The crisis exposes how vulnerable many ASEAN economies remain to imported hydrocarbons despite years of diversification rhetoric. Countries such as Indonesia, Thailand, Vietnam and the Philippines may revisit strategic petroleum reserve policies, domestic refining capacity and long-term supply contracts. Singapore may strengthen its role as a resilience hub for regional storage, trading and emergency redistribution.
The shock could also accelerate the region’s energy transition—not primarily for climate reasons, but for security reasons. Solar, battery storage, regional power grids, biofuels and electrified transport reduce dependence on imported oil products. What climate diplomacy struggled to achieve, geopolitics may now advance more quickly.
There may also be renewed interest in ASEAN-level coordination. A region-wide framework on fuel reserves, emergency response mechanisms and maritime energy security would become more valuable in a world where external chokepoints can trigger domestic inflationary pressures. In the Joint Statement of the Special ASEAN Ministers on Energy Meeting (AMEM) on the Latest Situation in the Middle East (28 April 2026)13, ministers pointed to the need for a more coordinated response as geopolitical risks intensify. They also urged faster progress on the ASEAN Petroleum Security Agreement (APSA) to support information sharing and collective response during disruptions, alongside closer monitoring and coordination through institutions such as the ASEAN Centre for Energy (ACE) and ASCOPE, and continued engagement with Dialogue Partners.
Most importantly, policymakers will be reminded that the energy transition has not ended oil geopolitics. Renewable growth may reduce future dependence, but present economic systems still run on hydrocarbons moved through vulnerable corridors.
For years, markets believed resilience had been proven. Russian sanctions, pandemic demand collapses and regional attacks all strained the system, yet oil kept flowing.
The Strait of Hormuz crisis is distinct in that it affects the fundamental architecture of the market itself: movement, spare capacity and confidence.
For Southeast Asia, it is also a warning: growth models built on imported fuel, open sea lanes and low freight costs can no longer be taken for granted.
Even within two months, the conflict has not only driven up prices but also fundamentally challenged underlying assumptions about stability and access.
Written by Suchart Charles Klaikaew, Senior Energy Advisor, CASE for Southeast Asia and Project Lead, IKI JET Thailand – Just Energy Transition in Coal Regions (JET-CR Platform).
- US to Blockade Iranian Ports, Warns Ships Could Be Captured if Leaving Iran – Bloomberg ↩︎
- OIES Oil Monthly – Issue 53 – Oxford Institute for Energy Studies ↩︎
- Iran war oil market impact: Strait of Hormuz crisis deepens Iran war and the strait of Hormuz: Oil market implications six weeks in | Kpler – Apr 07, 2026 ↩︎
- Ibid., ↩︎
- Gulf economies head for worst crisis since pandemic as war roils energy lifeline | Reuters ↩︎
- Colombia hosts first meeting to quit fossil fuels as energy crisis worsens ↩︎
- Executive summary – Southeast Asia Energy Outlook 2024 – Analysis – IEA ↩︎
- Asian refineries slash output as Iran crisis chokes crude supplies ↩︎
- Oil surge sharpens calls for Indonesia to shift away from fossil fuels ↩︎
- oecd.org/content/dam/oecd/en/publications/reports/2020/03/oil-2020_7a8c7772/cf9397c0-en.pdf ↩︎
- Middle East conflict drains Singapore’s marine fuel supplies ↩︎
- IEA Member countries to carry out largest ever oil stock release amid market disruptions from Middle East conflict – News – IEA ↩︎
- Joint Statement of the Special ASEAN Ministers on Energy Meeting (AMEM) on the Latest Situation in the Middle East – ASEAN Centre for Energy (ACE) ↩︎
