Iran Conflict Exposes Energy Vulnerabilities in Southeast Asia, IEA Report Warns

BANGKOK — The ongoing conflict in Iran has revealed critical vulnerabilities in Southeast Asia’s energy infrastructure, potentially costing the region billions of dollars unless it rapidly diversifies its energy sources, according to a new International Energy Agency report released Tuesday.

The report warns that Southeast Asia’s heavy reliance on oil and gas shipments traversing the Strait of Hormuz poses significant security risks, creating what it describes as a “stark wake-up call” for regional energy independence.

While the region has shown growing momentum toward clean energy solutions — including electric vehicle adoption, nuclear power interest, and expanding solar installations — the IEA emphasizes that more comprehensive reforms are essential. Without such changes, Southeast Asia’s energy import expenses could surge to $245 billion by 2035, compared to $80 billion in 2024.

“Diversification of energy sources and supply routes is now a central priority,” stated Fatih Birol, executive director of the IEA.

The energy disruption triggered by the Iran conflict has forced Southeast Asia into emergency response mode, resulting in elevated energy costs and accelerating inflation across the region. Paradoxically, the crisis has also reinforced coal’s role in energy security during emergencies, despite global efforts to reduce fossil fuel dependence.

Nuclear energy development is advancing in several countries, with Indonesia, Vietnam, and the Philippines showing the most progress. However, lengthy construction timelines and regulatory hurdles continue to delay implementation.

The Philippines has emerged as a notable example, declaring a national energy emergency and witnessing record rooftop solar installations as consumers seek immediate relief from soaring utility bills. Chinese solar panel imports to the Philippines tripled in the first quarter of 2026 compared to the previous year.

Transportation sectors across the region have similarly pivoted toward electrification. Electric vehicle sales exceeded 500,000 units in 2025, representing a doubling from the previous year and accounting for one in every five vehicles sold in the region.

In a bold policy move, Laos banned fuel-powered vehicle imports for the remainder of 2026 to reduce oil dependence and accelerate the transition to electric mobility.

Despite a tentative ceasefire agreement, elevated fossil fuel prices are expected to persist, likely driving increased investment in renewable energy deployment, according to energy experts.

The IEA recommends reducing overall fossil fuel import demand through improved grid efficiency and expanded renewable energy investments, including solar, wind, hydroelectric, and geothermal power.

“The Middle East conflict serves as both a stress test for Southeast Asia’s current energy system and a catalyst for accelerating fundamental structural transformation,” the report concluded.

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