Asia braces for second wave of energy shocks from Iran war

Asian governments are grappling with a second, more severe wave of energy disruptions as the Iran conflict enters a prolonged phase, depleting the initial bu...

What Happened

Asian governments are grappling with a second, more severe wave of energy disruptions as the Iran conflict enters a prolonged phase, depleting the initial buffers — strategic petroleum reserves, emergency rationing measures, and spot LNG procurement — deployed in the war's opening weeks.
Countries have been forced into difficult trade-offs: rationing electricity at the cost of industrial output, diverting natural gas to households away from fertiliser plants, and drawing down strategic stockpiles faster than anticipated.
In India, redirecting cooking gas supplies to approximately 330 million households dependent on LPG forced cuts in natural gas feedstock to fertiliser plants — creating a cascading threat to food security through reduced urea availability ahead of a planting season.
LNG spot prices in Asia surged over 140% compared to pre-war levels, driven by the near-complete disruption of traffic through the Strait of Hormuz.
Brent crude prices climbed from around $80 per barrel at the war's outset to as high as approximately $120 per barrel, representing the largest supply disruption in the recorded history of global oil markets according to the International Energy Agency (IEA).
Governments in the region are now weighing whether to hike domestic energy prices, impose rationing, or seek alternative LNG cargoes from Atlantic Basin suppliers — all at significantly higher cost.

Static Topic Bridges

The Strait of Hormuz: World's Most Critical Energy Chokepoint

A maritime chokepoint is a narrow passage through which a disproportionate volume of global trade must pass, making it strategically critical and vulnerable to disruption. The Strait of Hormuz, located between Iran and Oman, is the world's most important oil transit chokepoint. It connects the Persian Gulf — where Saudi Arabia, Iraq, UAE, Kuwait, and Qatar's oil terminals are located — with the Gulf of Oman and the Arabian Sea. The strait is approximately 167 km long with a navigable width as narrow as 24 km. In 2024, approximately 20 million barrels per day (b/d) of oil flowed through the strait, equivalent to roughly 20% of global petroleum liquids consumption and over 25% of global seaborne oil trade. Crucially, there are very few pipeline alternatives of sufficient capacity to divert Gulf oil if the strait is closed — making the strait's vulnerability the central fact of global energy security.

84% of crude oil transiting the Strait of Hormuz in 2024 went to Asian markets.
Top Asian destination countries: China, India, Japan, and South Korea — together accounting for approximately 69% of all Hormuz crude flows in 2024.
India's dependence: approximately 80–85% of India's crude oil import basket originates from Middle East producers accessed via the Strait of Hormuz.
The IEA has characterised the 2026 disruption as the "largest supply disruption in the history of the global oil market."
Alternative pipeline routes (Saudi Arabia's East-West pipeline to Yanbu, UAE's Abu Dhabi Crude Oil Pipeline to Fujairah) have limited capacity relative to Hormuz throughput.

Connection to this news: Asian economies' extreme vulnerability to Hormuz disruptions — precisely because 84% of the strait's oil flows to Asia — explains why the second wave of energy shocks is hitting Asian governments disproportionately hard compared to Western consumers who have greater access to Atlantic Basin alternatives.

Energy Security: Concepts, Strategies, and India's Framework

Energy security is defined as the uninterrupted availability of energy sources at an affordable price. The International Energy Agency (IEA) defines it across two dimensions: short-term security (ability of the energy system to react promptly to sudden changes in supply-demand balance) and long-term security (timely investments to supply energy in line with economic development and environmental needs). India's energy security is institutionally managed through the Ministry of Petroleum and Natural Gas, the Ministry of New and Renewable Energy, and the Strategic Petroleum Reserves (SPR) programme managed by Indian Strategic Petroleum Reserves Limited (ISPRL).

India's Strategic Petroleum Reserves (SPR): India has built underground rock cavern storage facilities at Visakhapatnam (Andhra Pradesh), Mangaluru, and Padur (both Karnataka) with a combined capacity of approximately 5.33 million metric tonnes (MMT) — equivalent to roughly 9.5 days of consumption at current import rates.
India is not a member of the IEA (which requires OECD membership and 90-day SPR), but participates in IEA emergency exercises as an association member.
The Hydrocarbon Exploration and Licensing Policy (HELP), 2016, and Open Acreage Licensing Policy (OALP) aim to reduce import dependence by promoting domestic exploration.
India's energy mix: approximately 55–60% of electricity is coal-based, with oil almost entirely import-dependent and domestic natural gas meeting only a fraction of demand.

Connection to this news: India's SPR capacity of 9.5 days is critically insufficient to buffer a prolonged Hormuz disruption; the "second wave" hitting Asian countries reflects precisely this limit — initial buffers have been exhausted and structural dependence reasserts itself, demanding painful demand-side adjustments.

Fertiliser-Food Security Nexus: Natural Gas as Agricultural Input

The link between natural gas prices, fertiliser production, and food security is a critical systems-level concept tested in UPSC Mains. Urea, the most widely used nitrogen fertiliser in India, is produced using the Haber-Bosch process, which requires natural gas (specifically methane, used as both feedstock and fuel) as its primary input. When natural gas is diverted from industrial use to household cooking fuel — as happened in India during the current crisis — fertiliser plants either reduce production or shut down, reducing urea availability. This raises urea prices, cuts application rates, reduces crop yields, and ultimately contributes to food price inflation. India is the world's second-largest consumer of urea (after China) and simultaneously the world's largest importer of urea.

India's urea imports in recent years have averaged around 7–8 million tonnes annually, with domestic production of approximately 25 million tonnes — together meeting demand of about 32–33 million tonnes.
The government heavily subsidises urea — retail price is fixed at ₹242 per 45-kg bag regardless of production cost; the subsidy difference is borne by the Union Budget.
In FY26, India's fertiliser subsidy bill exceeded ₹1.64 lakh crore, one of the largest subsidy heads in the Union Budget.
The Nutrient Based Subsidy (NBS) scheme covers non-urea fertilisers (P&K), but urea remains under a fixed-price administered regime.
A disruption in urea supply intersects with agricultural risk: poor monsoon forecasts (El Niño conditions) further compound the food production threat.

Connection to this news: The article's mention of gas being diverted from fertiliser plants to household cooking illustrates precisely this nexus — energy security and food security are not separate policy domains but deeply interlinked systems where a shock in one sector propagates into the other.

Asian Energy Governance and Regional Cooperation Gaps

Unlike Europe's integrated energy market and the IEA's coordinated emergency response mechanism (involving 31 member countries who must hold 90-day oil stocks and participate in collective emergency drawdowns), Asia lacks an equivalent binding regional energy security framework. The ASEAN+3 Emergency Rice Reserve (APTERR) exists for food but there is no analogous oil reserve coordination mechanism among Asian importers. Bilateral and plurilateral arrangements exist — India participates in IEA association, Japan and South Korea are full IEA members, China is not — but they do not create enforceable obligations for coordinated stockpile releases or demand restraint.

The IEA emergency response requires member countries to hold strategic reserves equal to 90 days of net oil imports and to be able to release them in a coordinated global stockpile release (GSR).
China maintains the largest SPR in Asia at approximately 500+ million barrels (details not fully disclosed), but China is not an IEA member and its SPR releases are unilateral.
Japan's SPR is one of the most developed in Asia: approximately 175 days of import cover as of recent data.
India's SPR: ~9.5 days — significantly below IEA standards.
The absence of a binding Asian energy cooperation framework means each country defaults to unilateral demand rationing, competitive LNG spot procurement (driving prices higher), and strategic reserve drawdowns — a collectively suboptimal outcome.

Connection to this news: The "second wave" of energy shocks hitting Asia disproportionately reflects this governance gap — without coordinated demand management or burden-sharing, Asian importers are individually outbidding each other on the LNG spot market and depleting national buffers at unsustainable rates.

Key Facts & Data

Strait of Hormuz throughput (2024): approximately 20 million b/d — ~20% of global petroleum consumption, ~25% of global seaborne oil trade.
Share of Hormuz crude flowing to Asia (2024): 84%.
Top Asian Hormuz crude importers: China, India, Japan, South Korea (~69% of total Hormuz flows).
Brent crude price range since Iran war: ~$80 per barrel (pre-war) to ~$120 per barrel (peak).
LNG spot price increase in Asia: over 140% since the conflict began.
India's SPR capacity: approximately 5.33 MMT (~9.5 days of import cover).
SPR locations: Visakhapatnam (Andhra Pradesh), Mangaluru and Padur (Karnataka).
India's household LPG coverage: approximately 330 million households.
India's urea demand: approximately 32–33 million tonnes per year; domestic production ~25 MT; imports ~7–8 MT.
IEA emergency oil reserve standard: 90 days of net import cover.
Japan's SPR: approximately 175 days of import cover.
India's crude oil import basket: ~80–85% from Middle East/Gulf producers.