Strait of Hormuz crisis reinforces need for Southeast Asia to tackle major energy vulnerabilities

Disruptions to oil and gas flows through the Strait of Hormuz have exposed major structural risks in Southeast Asia’s energy sector, a new IEA report finds, with stronger action needed to bolster energy security and affordability as the region’s energy use soars.

The 2026 edition of the Southeast Asia Energy Outlook, out today, provides a comprehensive assessment of the latest energy developments across the region, as well as updated projections for the coming decades. It examines energy trends across the 11 countries that make up the Association of Southeast Asian Nations (ASEAN).

As energy security concerns move ever higher on the policy agenda for countries in Southeast Asia and beyond, this year’s report explores the trajectory that the region was on prior to the current energy crisis triggered by the conflict in the Middle East – and considers the potential implications of the crisis for policy priorities and investment strategies.

The report highlights the extent to which Southeast Asia is exposed to the current crisis. The Middle East accounts for 60% of the region’s crude oil imports, and almost half of the oil products that are refined or consumed in Southeast Asia come from Middle East crude oil. As a result, the virtual shutdown of energy shipments through the Strait of Hormuz has had major consequences for countries across the region – leading to shortages of petrochemical feedstocks, chemical products and the liquefied petroleum gas that many households use for cooking.

For now, governments are focused on managing short-term impacts by instituting emergency measures to curb demand, such as encouraging residents to work from home and use public transport. Yet based on the region’s pre-crisis trajectory, the report finds it will be equally important to address the deeper energy system vulnerabilities the crisis has laid bare. Southeast Asia’s energy import bill is projected to reach $160 billion this year. It is set to increase further in the decades ahead, potentially rising to $400 billion, or 5% of its economy, by mid-century based on current policy settings.

“Southeast Asia is a crucial region shaping global energy trends and set to account for 20% of the growth in the world’s energy demand over the next decade, second only to India. The energy crisis has exposed structural weaknesses in its energy sector that need to be addressed rapidly and robustly,” said IEA Executive Director Fatih Birol. “Diversification of energy sources and supply routes is now a central priority, with deployment of different fuels and technologies, electrification and efficiency serving as important levers to reduce import exposure and strengthen resilience. Stronger regional cooperation would also deliver major benefits. The IEA, which launched its first Regional Cooperation Centre in Singapore last year, will continue to support countries across the region as they adapt their strategies – with careful and balanced policymaking key to improving energy security, affordability and sustainability.”

The report finds that a preference for domestically available energy resources is emerging, although the strategic options vary by country. Some may choose to develop untapped domestic oil and gas resources, although the report sees greater investment flowing towards other options. Renewable power capacity is already set to nearly triple within a decade under today’s policy settings, and early signs of additional momentum are visible in solar deployment. The Philippines became the second-largest destination for Chinese solar exports in the first quarter of 2026, with imports around three times as high as in the same period in 2025. Coal, which continues to play a major role in the region’s energy sector, could also receive some additional support from the renewed focus on energy security. Nuclear power represents a longer-term diversification option in Southeast Asia and there is growing interest in several countries, but its role will depend on accelerating deployment and reining in long construction lead times.

Electricity is becoming increasingly central in Southeast Asia’s energy future, with power demand already growing twice as fast as overall energy use. It rises rapidly to 2050 in all the report’s scenarios – increasing by an amount equivalent to Japan’s total electricity generation today in the next decade alone. This growth is being driven by the expansion of populations and economies, which underpin growth in light industries, and increasing cooling demand. The stock of residential air conditioners in the region set to triple by 2035. Growing electric vehicle uptake is also contributing. Today, one in five cars sold in Southeast Asia is electric, and there are signs of additional policy support being introduced for EVs in response to the current crisis.

Against this backdrop, the report emphasises the scope for stronger policy action on energy efficiency, a cost-effective way to strengthen resilience both during the current crisis and in the longer term. It also stresses that a more coordinated regional response to the energy challenges at hand could deliver substantial benefits. This applies to electricity – where the ASEAN Power Grid project could deliver cost savings and enhance electricity security – and to oil security and industrial strategies, where greater dialogue can help countries build on their respective strengths.