A RANE webinar brought together analysts Chase Blazek (Northeast Asia) and Nate (Southeast Asia) to unpack how the Iran war and Strait of Hormuz disruptions are rippling through APAC politics and why each country is responding very differently.
With the Strait of Hormuz largely closed due to the Iran war, Asia — the world’s most energy-import-dependent region — is scrambling for crude oil, LNG, fertilizers, helium, and petrochemicals. Even with a fragile ceasefire emerging, the downstream disruptions are expected to persist through the rest of 2026.
China has been unusually quiet in global oil markets, drawing on strategic reserves and restricting refined product exports rather than competing for scarce supplies. Its early pivot to EVs, hybrids, and coal as backup power has provided a buffer, but the big question is what happens when China re-enters crude markets and potentially outbids everyone else.
As both a major LNG exporter and the region’s largest importer of refined fuel products, Australia is walking a tightrope. Prime Minister Albanese has been touring Southeast Asia to swap Australian LNG for refined products. But Australia’s own domestic policy —requiring 20% of LNG output to be reserved onshore by 2027 — has alarmed trade partners like Japan, South Korea, and Malaysia, forcing Canberra to soften its stance.The ruling Labor Party faces rising pressure from right-wing populist party OneNation, which recently polled ahead of both major parties, limiting Labor’s freedom to act.
Taiwan’s chip and AI industries are wealthy enough to pay premium prices for energy supplies, but the island remains dangerously dependent on imports through contested waters. The long anti-nuclear Democratic Progressive Party has softened its opposition to nuclear revival, but Taiwan’s legislative gridlock means no structural change is imminent, possibly for a decade or more.
Prime Minister Takaichi hasscored diplomatic wins diversifying Japan’s oil sources away from the Middle East but faces a difficult balancing act: maintaining fuel subsidies to protect public support while keeping the LDP leadership onside. If the ceasefire holds, Japan’s navy could join a minesweeping mission in the Strait — a politically safer option than direct military involvement — but that remains conditional on peace holding.
The energy crunch is compounding Indonesia’s pre-existing challenges. President Subianto’s sweeping spending agenda (military modernization, free school meals, infrastructure) is under severe fiscal strain as gasoline subsidy costs have surged over 200%. Meanwhile, his controversial moves to allow military and police into civilian government roles are stoking street protests and echoes of the authoritarian Suharto era. The rupiah has hit record lows and a Moody’s credit downgrade maybe imminent.
Malaysia faces a similar subsidy dilemma. PM Anwar Ibrahim is reportedly weighing a snap election —possibly as early as July — so he can win a fresh mandate before rolling back costly fuel subsidies rather than after. But his coalition is showing signs of fracture, making the political math uncertain.
Despite vastly different circumstances, a common theme runs through the region: domestic politics comes first. Countries may share similar energy vulnerabilities and purchasing power yet respond in entirely different ways based on their political constraints.Military involvement in Strait of Hormuz operations remains deeply unpopular across Asia, even in countries like Thailand, which had vessels struck in the conflict. For APAC leaders, this is a crisis of political survival as much as energy security.
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