How energy insecurity is reshaping relationships in the Asia-Pacific   

Asia-Pacific bearing the brunt of shortages 

Roughly 80% of crude oil and LNG passing through the Strait of Hormuz is destined for Asia, making the region especially vulnerable to the consequences of the conflict in the Middle East. The scale of impact varies market-to-market:    

• An estimated 90% of Japan’s crude oil is sourced from the Middle East. Although it maintains significant strategic reserves on and offshore, its reliance on maritime trade means it is more exposed than most major economies.   

• In 2025, China imported about half its crude oil and almost one-third of its LNG from the Middle East. However, its large strategic reserves, diversified supplier base and overland pipeline infrastructure mean it has more of a buffer. 

• Although only a small fraction of Australia’s oil comes directly from the Middle East, it relies on Asian refining hubs which import crude from the Gulf. But as one of the world’s largest LNG exporters, with around 90% of trade going to regional markets, Australia is also a source of energy security for the region.  

Beyond energy, the impact is compounded by second-order supply disruptions. The possibility of fertiliser shortages is a particular concern – India, for instance, imports an estimated 40% of its urea and phosphate from the Middle East. Fertiliser shortages could squeeze crop production, with implications for domestic and global markets and a disproportionate impact on poorer countries. Plastics are another concern, given regional manufacturing relies on hydrocarbons from the Gulf – a number of major South Korean petrochemical producers have already significantly cut run rates.  

As supply routes continue to be disrupted, regional vulnerabilities are becoming more acute. Most governments have signalled they expect the crisis will have a long tail – even if a diplomatic breakthrough unblocks trade through the Strait of Hormuz overnight, the region would still face prolonged shortages rather than a temporary supply shock. 

Staying on the sidelines in the Middle East 

In general, governments in Asia are trying to avoid being drawn into events in the Middle East. Japan, South Korea and Australia – all long-standing US allies – have largely sidestepped pressure from Trump to actively contribute to the American operation. ASEAN countries have similarly kept a low profile, including a calibrated statement by Foreign Ministers calling on all countries to respect international law. Some ASEANs – namely, the Philippines, Thailand and Malaysia – have reportedly had some success negotiating with Iran for safe passage of vessels through the Strait.   

Pakistan is a clear exception – its close relationships with both Iran and the US mean it is uniquely well-placed to facilitate talks between the two sides. China has also been busier than many others in the region, including shuttle diplomacy with the Gulf States and lending its support to Pakistan’s role as a mediator. But there are also signs China is now losing patience with the situation. Speaking in mid-April, Chinese President Xi Jinping called for “normal passage” of trade through the Strait of Hormuz. His comments, as the first time Xi has publicly addressed the issue, underlined alarm about likely domestic and regional effects of prolonged energy shortages.  

Middle East conflict as a spur for new Asian diplomacy 

In response to the crisis, governments across Asia have introduced domestic measures to address both demand and supply pressures – including price caps on petrol, cutting fuel levies, voluntary energy-saving measures, fuel export restrictions, and releases from strategic reserves. Many governments have also flagged the possibility of tougher measures down the line if shortages continue. 

Typically, instability abroad gives rise to reflexive protectionism and calls for sovereign self-sufficiency. While this line of thinking has certainly been evident in some commentary following the outbreak of the conflict, the crisis has also precipitated a wave of intra-regional diplomacy.  

Broadly, two new developments stand out. The first involves China’s role as an energy supplier in the region, while the second sees new “middle power” coordination to address mutual dependencies.  

During March, China curbed exports of energy (including diesel, gasoline and jet fuel) and fertilisers. Around the same time, it received requests for access to supplies from regional nations. Most notably, China continued to deliver new shipments to the Philippines, despite long-standing tensions between the two nations over the South China Sea. With the Philippines-US alliance under pressure, Beijing appears to be using energy supplies as a lever to recalibrate the relationship. Recent comments by Philippine President Ferdinand Marcos Jnr that a “reset” of relations with China was underway suggest this approach could already be getting traction.  

Similarly, despite facing its own pressures, Japan announced a new $10bn fund to support Southeast Asian countries to weather the energy crunch. For Tokyo, the funding is designed to shore up critical Japanese imports from Southeast Asia (such as medical plastics) and is also consistent with Japan’s broader competition with China for influence among the ASEANs. 

Elsewhere, middle powers have moved quickly to address mutual dependencies. State-backed energy companies in Japan and South Korea have signed an agreement to strengthen LNG supply management. Cooperation between Singapore and Australia has likewise intensified – on the basis that Singapore supplies more than a quarter of Australia’s refined fuel, and Australia provides about one third of Singapore’s LNG. Australia has also signed agreements with Brunei and Malaysia to continue fuel trade, and an agreement with Indonesia to secure fertiliser supply.  

Looking ahead  

While much of this diplomatic activity has involved a quid pro quo, we should also recognise that it represents genuine cooperation under pressure. Regional leaders have been quick to point out that, in many cases, the tack to transnationalism was only made possible by strong existing relationships and institutional ties. There is also evidence that governments are responding to the crisis in ways that also serve their broader strategic aims. While any change will be incremental, how Asian nations respond to this crisis could shape the evolution of regional dynamics over time.  

This blog was written by Flint Partner Katie Whitting and Senior Adviser James Crabtree.  

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