There is still no lasting peace deal in the Persian Gulf, but energy-hungry Asia is already drawing energy lessons from four months of war: it needs bigger buffers, a greater diversity of fossil-fuel suppliers, and a better mix of power sources overall.
Flows of oil and natural gas have been returning to normal and prices have tumbled since an interim US-Iran accord was signed last month that pried open the Strait of Hormuz, relieving the immediate sense of crisis.
But the consequences of the historic shock still stand to be far-reaching. Policymakers are recalibrating their energy priorities — and nowhere more so than Asia, a key consuming region for Middle Eastern oil and gas.
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India has said it plans to build strategic reserves of crude, liquefied petroleum and natural gas, while Indonesia and Malaysia are looking to raise the amount of palm oil blended into diesel — a move to bolster energy security and cut back consumption. Japan may upgrade refineries so that they can process crude from a greater range of suppliers. Almost everywhere, a push toward renewable energy has gained urgency.
“The Iran war has been a stark reminder that energy security remains one of Asia’s biggest vulnerabilities,” said Warren Patterson, head of commodities strategy for ING Groep NV in Singapore. “Governments should, and are likely to, focus on diversifying energy supplies, building strategic reserves, and accelerating the energy transition. Resilience comes from a more diversified energy system.”
While the impact of the war has rippled across the globe, Asia was impacted almost immediately by the disruption in energy flows that followed the first US and Israeli strikes on Iran. Its relative proximity to gulf suppliers of oil and gas, combined with its dependence on imports, left the region exposed by the closure of Hormuz.
The crisis triggered energy shortages from India and Pakistan to Australia as pumps ran dry, followed by a frantic search for alternative short-term supplies to bridge the gaps. China fared better, aided by substantial stockpiles, and a more extensive network of alternative-energy sources — but was still not immune. Beijing eventually curbed fuel exports.
