After Hormuz: How Asia's economies should prepare for supply chain risks
The Strait of Hormuz tensions highlight critical energy security vulnerabilities for Asia's economies. Experts warn that diversifying energy sources and creating alternative supply routes is essential to insulate Asia from geopolitical disruptions.
The Strait of Hormuz serves as a critical passage for roughly one-fifth of global oil supplies. The escalation in US-Iran tensions threatens to disrupt this vital waterway, creating acute energy security risks for Asia's oil-importing economies. India, China, and Japan face particularly acute exposure to any extended closure.
Experts recommend a multi-pronged strategy for Asia to mitigate this vulnerability. Key measures include accelerating renewable energy investments, building strategic petroleum reserves, and developing alternative shipping routes that bypass the Strait—such as longer circumnavigations or enhanced Middle-Eastern logistics hubs. Some countries are also negotiating direct energy deals with Iran and Russia to reduce Hormuz dependence.
India's position is especially precarious. The country imports over 85% of its crude oil, making it highly vulnerable to Hormuz disruptions. Any prolonged closure would cascade through India's economy, spiking inflation and pressuring growth. Regional cooperation—including India-Japan-US coordination and ASEAN energy initiatives—may offer partial mitigation, but structural diversification remains the priority.
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