History suggests the energy crunch is just the beginning of a chain reaction that ends with a food and social stability crisis.
It has been 50 years since the 1973 oil crisis, but Southeast Asia today is facing a very familiar problem. The Iran war is not only a Middle Eastern conflict or a war between the United States, Israel, and Iran. It is becoming an Asian energy shock especially throughout Southeast Asia. The immediate problem is the fuel crisis. But the larger danger is the sequence that might potentially follow: first the energy crisis, then the inflation crisis, then the fiscal crisis, and potentially after that a food and social stability crisis.
This has been seen before: It is a path-dependent reading of how external shocks have historically moved through the region’s political economy, from the 1973 oil shock and the 1997-98 Asian financial crisis to the 2007-08 food-price crisis, and COVID-19 crisis. This history explains how Southeast Asian governments are already responding to the crisis unfolding today – through subsidies in Malaysia, budget cuts in Indonesia, shorter work arrangements in the Philippines, and fuel-switching in Vietnam.
The Strait of Hormuz normally carries about one-fifth of the world’s oil and LNG, and Asia is by far the most exposed destination market. Earlier reports showcased that in 2024, 84 percent of crude oil and condensate and 83 percent of LNG moving through Hormuz was bound for Asia. Now Hormuz is largely closed, and oil and LNG facilities are becoming targets for Israeli-U.S. and Iranian strikes.
The impacts are obvious. The International Energy Agency says the world has already lost around 11 million barrels per day of oil supply. The agency’s chief, Fatih Birol, has described the current shock as worse than the two oil crises of the 1970s and the gas turmoil that followed Russia’s invasion of Ukraine combined. Brent has risen roughly 55 percent to around $100 a barrel, while the regional disruption has also driven Singapore diesel benchmarks above $180 a barrel, up from about $92.5 before the war.
That is important because Southeast Asia sits at the downstream end of this disruption. The region’s economies remain highly exposed to imported hydrocarbons, to maritime chokepoints beyond their control, and to domestic political pressures around fuel prices.
As Hormuz is disrupted, the effects are not limited to tanker routes or benchmark prices. They travel through petrol stations, electricity bills, freight costs, fisheries, fertilizer, and food. There are reports that fertilizer trade has also been hit, with Hormuz-linked disruption pushing up nitrogen fertilizer prices by 30 to 40 percent and China has recently banned the exportation of fertilizer. That is exactly how an energy shock starts to spread into a wider inflation shock.
This is where path dependence becomes useful. Southeast Asian governments are again using their past experience to approach this crisis. They are reaching for familiar instruments: subsidies, price caps, reserve buffers, emergency imports, fuel switching, and temporary conservation measures. These policies are politically rational because they buy time and suppress immediate pain. But they are also path dependent because they reproduce an older model of crisis management. States cushion the first shock without escaping the structural vulnerabilities underneath it. What looks like resilience often turns out to be expensive improvisation.
History suggests that oil shocks are rarely only about oil. They tend to spill into inflation, slower growth, fiscal pressure, and political strain, particularly in import-dependent developing economies. The 1973-74 oil shock, for instance, helped drive oil prices from under $2 a barrel in 1972 to over $10 by January 1974, while inflation in emerging and developing economies peaked at 17.3 percent in 1974. In Indonesia, the 1997-98 Asian financial crisis showed how fiscal stress could turn political when fuel-subsidy cuts triggered protests and unrest. The 2007-08 food-price crisis then revealed how cost shocks could spread further into food systems, with rice prices surging as export restrictions and panic buying intensified pressure across Asia. The present Iran war shock should be read in much the same way: not simply as a rise in oil prices, but as the signs of the dominoes falling to an even bigger crisis.
The first stage, the energy crisis, is already here. Gasoline supplies to Asia are tightening so sharply that Europe and the United States are now sending cargoes eastward to capture higher margins. Around 1.6 million barrels have recently been dispatched from Europe, while ExxonMobil has shipped U.S. gasoline cargos to Australia. Asian refinery margins for gasoline have surged to near 2022 highs, around $37 a barrel over Brent. Regional exports are also tightening: China has banned exports, and Thailand and Vietnam have restricted theirs. This is a sign of a region scrambling to replace disrupted fuel flows.
The second stage, inflation, follows naturally. Fuel costs seep into logistics, agriculture, and household spending. In a region where transport and imported inputs matter deeply for consumer prices, higher diesel and fertilizer costs are not sectoral issues. They are general inflationary pressures. The wider war is already creating inflation fears across markets.
The third stage is fiscal strain. Once inflation becomes politically painful, states intervene. They subsidize, regulate, suspend taxes, or force temporary conservation. But this just shifts the cost from households to public finances. Across Southeast Asia, governments are already trying to stop the shock from widening from energy into inflation and fiscal stress.
Indonesia is already seeking about 80 trillion rupiah, roughly $6 billion, in budget savings to absorb the war’s economic impact. Malaysia has raised petrol-subsidy spending from 700 million ringgit to 3.2 billion ringgit to keep domestic prices stable. The Philippines, which imports more than 90 percent of its oil from the Gulf, has shortened work weeks, offered fuel support, and temporarily allowed Euro-II fuels with sulfur content of 500 ppm, ten times the 50-ppm permitted under Euro-IV standards, for older vehicles, jeepneys, generators, power plants, and marine use.
Cambodia is another case of how quickly thinner markets can seize up: about 33 percent of its 6,300 petrol stations shut at one stage before the closure rate fell to 5.77 percent as more fuel arrived from Singapore and Malaysia, whose exports to Cambodia rose 25 percent in early March. Vietnam has accelerated the rollout of E10 gasoline, which is a biofuel, in order to protect itself from fossil fuel reliance, while Singapore has relied on deeper buffers, including fuel-reserve rules requiring enough stocks for 60 days of normal operation for two generating units, with at least 30 days held on site.
Taken together, these responses show that governments understand the danger. But they also reveal how much the region still depends on familiar tools of emergency cushioning rather than deeper structural resilience.
Yet there is another dimension to this crisis that should not be ignored. One risk of prolonged LNG disruption is that parts of Asia fall back more heavily on coal and other emergency substitutes. Reports are already showing a region under supply strain, with refineries cutting output and governments searching urgently for alternatives. That may keep the lights on, but it also reinforces another problem: each emergency fix reduces immediate scarcity while deepening longer-term dependence and delaying structural transition. The result is not only a more expensive region, but potentially a dirtier and less resilient one as well.
There are even signs that the shock is spreading beyond households and ministries into strategic infrastructure. Rising energy and shipping costs affect not only transport and agriculture but also capital-intensive sectors that rely on imported equipment, backup power, and stable electricity pricing. In Southeast Asia, that means the pressure may eventually reach industrial operations and the digital economy as well. For example, the Philippines’ president mentioned that grounding planes is a “distinct possibility.” Even if those spillovers are less visible today than fuel subsidies or jeepney protests, they are important because they show how an energy crisis can gradually reshape wider development trajectories.
This leads to the fourth stage: food and social stability. That stage has not yet fully materialized across Southeast Asia but if fuel costs stay high, transport remains expensive. If fertilizer prices stay elevated, food production costs rise. If governments keep spending to cushion the blow, fiscal room narrows. And if wages fail to keep pace with the cost of living, frustration deepens.
The Iran war affects fertilizer through both trade and production. The Strait of Hormuz carries about 30 percent of global fertilizer trade, so disruption there delays or tightens supply, while nitrogen fertilizers such as urea are highly dependent on natural gas, making them vulnerable to the wider energy shock. Urea prices have already risen by around 30 to 40 percent, which raises farm costs and can later feed into lower yields and higher food prices. In Malaysia, the fertilizer prices have risen by 100 to 150 percent in two weeks in parts of the market, severe enough that some producers halted new orders.
Southeast Asia has seen versions of this before, from the inflationary pressures unleashed by oil shocks to the social consequences of the Asian financial crisis and the food-price tensions of 2007-08. The historical sequence may not repeat mechanically, but the pattern is recognizable.
That is why the Iran war should not be considered as “just” a Middle Eastern conflict with higher oil prices as a side effect. In Southeast Asia, it is activating a familiar and dangerous pattern. First comes energy disruption. Then inflation spreads through transport, electricity, and fertilizer. Then governments spend to suppress the pain, creating fiscal strain. And if the shock endures, food insecurity and social instability may follow. The region’s current responses show that policymakers understand this danger. What remains uncertain is whether they can do more than delay it.
The hardest part of an energy crisis is rarely the first spike. It is the period that follows: inflation, slower growth, fiscal fatigue, and thinning public patience. Southeast Asia has lived through versions of this before. The present shock may now be activating that path once more.
Southeast Asia has lived through repeated externally driven shocks before, from the 1973-74 oil crisis and the 1979 oil shock to the 1985 commodity collapse, the 1997-98 Asian financial crisis, the 2007-08 food and fuel crisis, the 2008-09 global financial crisis, the COVID-19 shock, and now the Iran-war energy shock. The real question is whether its governments can break the cycle of emergency cushioning before the next stage begins.
Spoiler alert: they never do.
