Asia Turns to Coal as Iran War Chokes Off Gas Supplies

The Iran war has significantly disrupted oil and gas supplies to Asia, prompting a multi-pronged diplomatic campaign to restore or find alternative supplies. Asian governments have launched high-level outreach to Middle-East producers and traditional allies, regional coordination to diversify supply routes, and engagement with non-Middle-East exporters to open short-term alternatives.

Diplomatic Efforts

China, Japan, India, and South Korea have initiated intensive outreach tours, emergency-powers orders, and requests to prioritize LNG deliveries. The United States and Saudi Arabia have opened a back-channel dialogue to stabilize oil flows, while ASEAN energy ministers have adopted a non-binding communiqué to diversify gas imports and create a regional gas-reserve pool.

Quantitative Context

The transit bottleneck has limited the number of vessels passing through the Strait of Hormuz, with only approximately 90 vessels having passed through since the war began. Reserve coverage varies across countries, with Japan holding approximately 250 days of oil-product reserves, South Korea holding approximately 7 months of oil reserves, and China holding strategic reserves equal to approximately 3 months of imports.

Energy Mix Shifts and Budget Response

China’s renewables now supply approximately 30% of its power mix, while Indonesia is seeking approximately 80 trillion rupiah (approximately US$6 billion) in budget savings to absorb the shock.

Representative Quotes

IMF Managing Director Kristalina Georgieva notes that a 10% increase in energy prices that lasts a year would increase global inflation by 40 basis points and slow global economic growth. UN ESCAP’s Michael Williamson highlights that the countries exposed to the supply disruption are primarily in the Asia region, while the Institute for Energy Economics & Financial Analysis’ Ramnath Iyer warns that Asia should prepare for ‘cascading impacts into all economic activities.’

Sources