Energy Security at Risk as Tensions Rise in the Indo-Pacific

Recent military actions by Israel and the United States targeting Iran’s nuclear facilities have raised significant concerns regarding energy security in the Indo-Pacific region. The Iranian Parliament has suggested closing the Strait of Hormuz, a critical maritime route responsible for approximately 20% of global oil shipments. The economic implications of such a move would be profound, particularly for major economies in the region.

The dependence on oil trade passing through this strait is considerable. In 2025, estimates indicate that around 80% of Japan’s oil imports, 60% of South Korea’s, 37% of India’s, and 38% of China’s will come from the Persian Gulf. Notably, 84% of crude oil and 83% of natural gas shipments through the strait are directed towards Asian markets. The recent military actions have placed both global and regional actors in a precarious position.

While a complete closure of the strait may not serve Iran’s interests, the country has various asymmetric warfare strategies it could employ, creating potential threats to major economies. For instance, electronic interference such as GPS jamming can severely disrupt maritime trade. During a recent conflict, significant jamming activities were traced back to the Iranian port of Bandar Abbas, affecting navigation in the Gulf and causing disorientation among cargo vessels. This resulted in incidents, including two vessels colliding near the coast of Khor Fakkan port in the United Arab Emirates.

The Iranian government has previously resorted to seizing vessels as a tactic, as seen in November 2024 when the Iranian authorities confiscated the oil tanker St. Nikolas in a move they claimed was retaliation against U.S. actions. Despite a lull in direct conflict, the vulnerability of oil shipments through the Strait of Hormuz persists.

The ongoing unrest has also impacted trade between Europe and the Indo-Pacific. Since October 2023, activities by Ansar Allah, the military arm of the Houthi movement, have hindered navigation in the Bab al-Mandeb Strait, further complicating the energy landscape. Disruptions in oil shipments can lead to rapid price increases, potentially slowing GDP growth and triggering inflation. For instance, if oil prices were to surge to around $120 or $130 per barrel, Japan could face a 0.6% loss in its projected GDP for 2026.

In addressing these security risks, Indo-Pacific nations have varied approaches. They may consider a combination of strategies, including enhancing maritime governance and increasing naval presence in the Strait of Hormuz. India has engaged in anti-piracy operations in the Horn of Africa but has hesitated to take military action in the Gulf due to its multi-alignment strategy. Meanwhile, South Korea and Japan have actively participated in naval operations to protect their commercial fleets. Additionally, China’s investments in ports like Duqm in Oman and Khalifa Port in the UAE highlight its commitment to maintaining a strategic presence in the region.

Active diplomacy with regional entities, particularly the Gulf Cooperation Council and Iran, is another avenue. China has fostered a framework for cooperation with the GCC and formalized a 25-year strategic partnership with Iran in 2021. In contrast, U.S. Secretary of State Marco Rubio has called on Chinese leaders to persuade Iran against closing the strait, although such influence may be overstated.

Transitioning to renewable energy sources is another critical strategy. Japan, the most vulnerable to fossil fuel imports, must accelerate investments in solar, wind, and other renewable energies that began post-Fukushima disaster in 2011. Nations like India might look to strengthen ties with Russia or the United States for energy resources while exploring alternative oil pipelines.

None of these strategies offer immediate solutions and require significant investment and time to be effective. A pressing need exists to resume stalled nuclear negotiations between the United States and Iran, which could yield benefits for regional economies. The Indo-Pacific region must utilize economic and diplomatic tools to prevent widespread energy insecurity from destabilizing the global economy, requiring cooperation from the U.S., Japan, South Korea, India, ASEAN, and China.

China holds significant potential for stabilization through its Strategic Petroleum Reserve, estimated at around 531 million barrels. An immediate release of 100-150 million barrels could mitigate price spikes while affirming China’s role as a responsible stakeholder. Simultaneously, Japan’s advanced liquefied natural gas (LNG) infrastructure could enhance regional stability, allowing for swift action to activate swap agreements with Australia and Qatar.

India’s strategic petroleum reserve sites, with a combined capacity of 5.33 million metric tons, represent about 9-10 days of domestic crude demand. The nation must seek arrangements with Russia and the UAE while leveraging the International North-South Transport Corridor for energy flows independent of Iranian influence. ASEAN nations should consider activating the ASEAN Petroleum Security Agreement to pool resources and coordinate demand reduction measures.

South Korea is well-positioned to utilize its strategic reserve while collaborating with Japan on procurement strategies. The U.S. could release volumes from its strategic reserve while expediting export permits for LNG and crude to Indo-Pacific partners. Establishing a coordinated response framework could synchronize releases to prevent competitive hoarding and ensure collective bargaining power with alternative suppliers.

In summary, while the current geopolitical climate presents substantial challenges to energy security in the Indo-Pacific, strategic recommendations such as establishing an Energy Security Board, regional reserve sharing agreements, and accelerating renewable energy investments may offer pathways to stability. As nations navigate the complexities of their energy dependencies, a concerted, cooperative approach will be essential to fortifying the region’s economic security.