Europe and Asia fear that Trump’s Hormuz blockade will deepen the oil and gas shortage

The fragile ceasefire between the United States and Iran held the great promise of the long-awaited reopening of the Strait of Hormuz, the most critical maritime shipping route for global energy flows. That hope, in recent hours, has gone from vague to increasingly distant. Since Wednesday, when the truce began—with all the caveats one might add: bombs have continued to fall in various parts of the Middle East in recent days, especially in Lebanon—the volume of cargo ships has fallen even below the average of the days immediately preceding the agreement, with only a trace flow of tankers and LNG carriers. With the blockade announced this Sunday by the White House, things could get even worse: even fewer ships will pass. Or, perhaps, none at all.

Under normal circumstances, around one-fifth of the world’s daily oil and liquefied natural gas (LNG, the kind transported by ship) passes through the Strait of Hormuz. Of that amount, more than 80% ends up in Asia, especially in China—which, however, is beginning to see its consumption decline thanks to the rise of electric vehicles—India, South Korea, and Japan. But it also reaches the Philippines, Thailand, and Indonesia. There, the risk of supply crises is real.

Everyone is taking a gamble in the Strait of Hormuz, but not to the same degree. The fracking revolution (a controversial extraction technique due to its environmental impact, but one that has dramatically increased pumping) has given the U.S. unprecedented leeway: in less than a decade, it has gone from being a net importer to a net exporter of oil and natural gas. This provides a significant protective shield against the effects of a price war initiated by the Trump administration itself. The U.S. will remain vulnerable to price increases, such as those experienced in recent weeks, but its domestic supply appears secure.

Others cannot say the same. Despite not being, by any means, the largest importers of crude oil and gas from the region, the main countries of the European Union are in a much more precarious situation, given their need to import these raw materials. Two countries stand out: Italy, a major continental gas consumer where kerosene shortages are already being seen at some airports; and Germany.

The Persian Gulf is home to the world’s largest net exporter of crude oil (Saudi Arabia) and the third largest exporter of natural gas (Qatar). Faced with the sudden withdrawal of production from this region from the market—because ships cannot pass through the Strait of Hormuz—the 27 EU member states, and particularly Rome and Berlin, have been forced to pay a premium on their supplies for almost six weeks. In short, the bidding war for tankers and LNG carriers already en route has reignited, with ships changing course depending on who makes the highest bid. This has created a chaotic situation in the supply chain not seen since the height of the Russian invasion of Ukraine.

“Europe has a lot at stake because its economy, more than being dependent on the oil and gas from the Strait of Hormuz itself, is highly reliant on international prices for both. Even receiving small quantities from the Gulf, the competitiveness of its industry is at risk,” explains Jorge León, head of geopolitical analysis at the Norwegian consultancy Rystad Energy. “The situation in Asia is different: in addition to being affected by prices, it faces supply risks. Furthermore, most of its economies are emerging, and its energy demand is highly elastic: when prices rise, consumption falls much more sharply than in wealthy countries.”

The situation is particularly difficult in Southeast Asia. Heavily dependent on oil and gas imports, several countries in this region have been plunged in recent weeks into a myriad of measures including rationing, diversification of energy sources, incentives for teleworking to avoid transportation costs, subsidies, and fuel price caps, all in an attempt to cope with the turmoil in energy markets.

The Asian Development Bank has been quick to warn that a scenario of “prolonged and more severe conflict,” with persistent price increases until early 2027, could take an economic bite out of up to 1.3% off the growth of developing countries in the Asia-Pacific region, with its logical political repercussions.

In several Southeast Asian countries, with less room to maneuver than wealthier nations better equipped to handle such a crisis, governments have been forced to approve measures to mitigate rising prices and shortages. Meanwhile, some, like the Philippines, opted to reach agreements with Iran before the ceasefire to allow passage to ships heading to their ports. These agreements are now in jeopardy following Trump’s announcement that he will impose a blockade on the strait, even intercepting in international waters any ship that has paid a toll to Iran.

Austerity and restrictions

Despite meeting two-thirds of its oil demand through domestic production, Indonesia has just authorized airlines to add a fuel surcharge to ticket prices. It had previously announced a series of austerity measures, including fuel restrictions, cuts to official travel, and a mandatory teleworking policy for government employees on Fridays. State-subsidized fuel has been rationed, with a limit of 50 liters per day on gasoline purchases for private vehicles.

In late March, Indonesian President Prabowo Subianto traveled to Tokyo and, after a meeting with Japanese Prime Minister Sanae Takaichi, announced the signing of agreements for the development of clean energy projects, fossil fuel exploration, and geothermal energy. Both leaders assured that they would work together on energy security, given the situation in the Middle East.

In Thailand, which imports about 40% of its energy from the Persian Gulf, the government has warned that the state fund providing fuel subsidies risks running out within a couple of months if consumption continues at the current rate. “This is a moment of unprecedented gravity,” Energy Secretary Prasert Sinsukprasert told The Nation last week.

Diesel prices have tripled, and to mitigate the shortfall, the Thai government is negotiating with refineries to recover the “extraordinary profits” generated by the price increases in the markets and redistribute them among the population; it is also considering a general price reduction and channeling specific aid to the transportation sector and vulnerable households.

The Philippines, which imports nearly 100% of its oil from the Persian Gulf and about a quarter of its total energy supplies from the Middle East, declared a national energy emergency a couple of weeks ago due to the “imminent danger” looming over its gas and crude oil supplies. It was the first country in the world to take such a measure. Its government now has the authority to directly purchase fuel and petroleum products to bolster supplies and has formed a committee to oversee the orderly distribution of energy resources, food, medicine, and other essential goods.

The island nation has also approved direct aid to motorcycle taxis — one of the most popular forms of transportation — and other public transit services to reduce the impact on the pockets of employees in the sector, and some cities have decreed free transportation for some groups, such as students.

Special report on the ASEAN summit

As host of the upcoming Association of Southeast Asian Nations (ASEAN) summit, scheduled for May 7 and 8, Philippine President Ferdinand Marcos Jr. has said the forum will focus on the regional bloc’s responses to the “shocks” of war.

In Vietnam, which relies heavily on Kuwait for crude oil supplies, inflation reached 4.65% year-on-year in March, driven by the price of diesel (up 57%) and gasoline (up 30%), according to the local media outlet VN Economy. The soaring price increase has strained an informal economy largely driven by motorcycles: with some 77 million registered motorcycles, Vietnam has one of the highest ratios of these vehicles per capita in the world. Airfares also surged by 23%.

Last weekend, communist authorities asserted that they have energy supplies until the end of April and that they will continue taking steps to bolster domestic production capacity, diversify their energy sources, and increase the use of biofuels. Furthermore, Vietnamese Prime Minister Pham Minh Chinh met with his Russian counterpart, Mikhail Mishustin, in Moscow at the end of March to sign energy cooperation agreements, covering everything from oil and gas projects to the construction of nuclear power plants.

“The big winner in the Hormuz crisis is undoubtedly Russia,” Jorge León of Rystad Energy states assertively over the phone. “It has seen its sanctions partially lifted and is receiving significantly more money for its sales.” This is another reason why Europe is eagerly awaiting the reopening of Hormuz. A reopening that, several days after the ceasefire, remains shrouded in uncertainty.

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