Governments across Asia are scrambling to avoid a second major energy crisis in six months as Yemen's Houthis block the Bab al-Mandab strait, the southern entrance to the Red Sea, threatening Saudi oil exports. Countries such as Japan, the Philippines, Thailand, and South Korea, which rely on Middle East oil for up to 90% of their imports, face fresh supply disruptions after Iran's closure of the Strait of Hormuz in March.
Asia's vulnerability exposed
“They’re scraping at the bottom of the barrel in terms of global reserve capacity … there’s very little inventory now,” said Ahmed Helal from the Asia Group thinktank. The Houthi threat has already pushed oil prices above $100 per barrel, and Asian nations are spending billions on fuel subsidies to keep costs down, straining government budgets. South Korea quickly extended fuel tax cuts after the Houthi announcement, while Japan and Indonesia face rising inflation from higher import costs.
Rerouting oil around Africa
In March, Saudi Arabia rerouted oil exports from the Gulf to the Red Sea port of Yanbu, which now handles over 70% of Riyadh's crude exports. This lifeline for Asian buyers like China, India, Japan, and South Korea is now under threat. Some Japanese and South Korean refiners are seeking to bypass the Houthis by sending cargoes north through the Suez Canal and around Africa, but this detour is costly. Very large crude carriers (VLCCs) cannot pass through the Suez Canal fully loaded, requiring partial unloading and transport via Egypt's Sumed pipeline, adding logistical complications and expenses.
Insurers hike premiums
The Houthis targeted at least two Saudi oil tankers exiting the Red Sea last week and attacked Saudi oil infrastructure. The number of vessels transiting Bab al-Mandab has fallen to the lowest level in months. “Changing behaviour by tankers tells us that they are taking the threats seriously,” said Matt Smith, a commodity research director at Kpler. War risk premiums for tankers have reportedly doubled in the past week, adding hundreds of thousands of dollars to voyage costs, which will be passed on to Asian consumers already reeling from the US-Iran war energy shock.
Strategic reserves and renewables
After the Strait of Hormuz closure, Asian countries rushed to mitigate disruptions: coal-fired power plants were revived, Sri Lanka imposed a four-day work week, and Vietnam urged staff to work from home. Now, resources are running low. The Houthi threat has prompted the Philippines, India, and South Korea to bolster strategic oil and gas reserves. The crisis has also added urgency to the renewables transition, but with no short-term solutions, Asian importers are looking farther afield, including Russia. Japan and South Korea bought Russian oil for the first time since the 2022 invasion of Ukraine, and Chinese refiners have ramped up purchases of sanctioned Russian crude to counter disruptions.
Long-term reckoning
The disruption highlights a truth experts say Asian governments have ignored: their energy systems remain far too vulnerable. Helal predicts the crisis will force governments to reckon with supply chains and strategic reserve capacity. “There’s very little in the tank for them to draw on,” he said.
