Gas Shortages From Hormuz Disruption Are Derailing Southeast Asia's Power Buildout
Wood Mackenzie says gas shortfalls are slowing Southeast Asia's decarbonisation push as the region's energy import bill heads toward $160 billion this year.
Gas shortages and elevated LNG costs are now actively disrupting plans to expand power generation capacity across Southeast Asia, Wood Mackenzie reported on Thursday (2026-08-06), as ICE Brent crude front-month slipped to $91.01 a barrel on Tuesday (2026-08-18), down roughly 24% from its March 9 peak of $119 — its highest level since the 2022 energy crisis. The price retreat has bought limited relief for the region's energy planners.5,3
Southeast Asia buys around 60% of its crude oil from the Middle East, and almost half of the oil products refined or consumed across the region derive from Middle East crude, according to the IEA. When the Strait of Hormuz closed, those supply ratios translated directly into deficits.2
With roughly 84% of crude shipments through the strait destined for Asian markets, and China sourcing nearly 50% of its oil imports through that single chokepoint, the region bore the brunt of the global energy shock, according to The Asset. The closure did not hit all Asian buyers equally, but for those most reliant on Gulf crude the supply gap was immediate.3
Iraq offers the starkest example of the production impact. Output plunged from over 4 million barrels a day to just 1.4 million barrels a day after Hormuz closed, Oilprice.com reported. The Iraqi oil minister said in May that April exports had totalled just 10 million barrels, down from 93 million barrels before hostilities began.1
Former IEA executive director Nobuo Tanaka, speaking at a hydrogen industry event in Malaysia during the week of June 8 (2026-06-08), put the region-wide toll at 15 million barrels per day in lost supply flows from the Hormuz closure. Asian markets had run at an average daily import rate of 14.74 million barrels in 2025, according to Kpler data reported by Reuters, meaning the closure severed supply on a scale that exceeded the region's entire prior daily import volume from that corridor.1
The downstream damage has spread beyond crude. Shortages of liquefied petroleum gas used for cooking, petrochemical feedstocks and chemical products have emerged across the region, according to the IEA. Those shortfalls are adding pressure to governments already stretched by subsidy commitments and weakening fiscal positions.2
The IEA projects Southeast Asia's energy import bill at $160 billion for 2026, with a further projection that the figure could reach $400 billion by mid-century under current policy settings, equivalent to around 5% of the region's economy. The agency also identifies Southeast Asia as accounting for 20% of global energy demand growth going forward. Both figures point to an import dependency that deepens under baseline assumptions rather than narrows.2
Investment is beginning to shift. Indonesia is accelerating solar deployment alongside selective gas development, Wood Mackenzie said in its Thursday (2026-08-06) assessment, citing supply security logic made more urgent by the Hormuz disruption. The timing is difficult. Indonesian refineries remain partly dependent on Gulf crude while the solar buildout scales up, leaving the grid exposed to further disruptions in the interim.5
But the clean energy pivot faces supply chain constraints of its own. China dominates equipment supply chains in batteries, EVs and solar panels, though Vietnam and Indonesia are building capacity in wind turbine components and power cable assembly, according to asian-power.com. Southeast Asia has been hit harder than any other region by the energy crisis stemming from the Iran conflict, Oilprice.com reported on Saturday (2026-08-08), and the effort to localize clean energy equipment production remains at an early stage.4,6
JKM Asian LNG spot prices stood at $21.61/MMBtu on Tuesday (2026-08-18). The IEA projects the region's stock of air conditioners will grow from around 50 million units in 2020 to approximately 300 million by 2040, a demand curve that keeps rising regardless of how the Hormuz situation resolves. Indonesia's solar delivery pace, measured against that rising load and continued refinery exposure to Gulf supply, is the variable that energy markets will be watching in the months ahead.3