ASIATODAY.ID, JAKARTA — The escalating conflict in the Middle East has exposed deep vulnerabilities in Southeast Asia’s energy system, raising concerns over the region’s heavy dependence on imported fossil fuels and its exposure to future supply disruptions, according to the latest outlook from the International Energy Agency (IEA).
In its Southeast Asia Energy Outlook 2026, the IEA said the region is set to become one of the world’s largest drivers of energy demand growth, accounting for nearly 20% of global demand expansion through 2035 despite representing only 9% of the world’s population and 4% of global GDP.
However, the report warns that recent turmoil in global fuel markets has revealed structural weaknesses linked to import dependence, limited energy diversification, and highly concentrated supply routes.
Before the Middle East conflict intensified, around 60% of Southeast Asia’s crude oil imports and one-third of its gas imports originated from the region. Nearly 45% of refined oil products consumed across Southeast Asia also relied on Middle Eastern crude supplies.
The resulting price shock has already pushed up energy costs, fueled inflation, and increased economic risks across the region, prompting governments to introduce emergency measures ranging from fuel subsidies and price controls to demand-reduction programs and efforts to secure alternative energy supplies.
While such interventions may provide short-term relief, the IEA cautions that they do little to address the underlying vulnerabilities.
Without significant structural reforms, Southeast Asia’s fossil fuel import bill could surge from more than $80 billion in 2024 to approximately $245 billion by 2035, substantially increasing the region’s exposure to global price volatility and geopolitical disruptions.
By contrast, achieving existing climate pledges and clean energy targets could cut that import bill roughly in half by the middle of the next decade.
The impact of the crisis has been felt most acutely in refining, petrochemicals, electricity generation, and household cooking fuels. Supply disruptions have tightened availability of naphtha, a key petrochemical feedstock, as well as liquefied petroleum gas (LPG), which is used by roughly three-quarters of Southeast Asia’s population for cooking.
The conflict has also tightened global liquefied natural gas (LNG) markets, driving up fuel costs for power generation and, in some cases, encouraging a return to coal-fired electricity to maintain energy security.
According to the IEA, stronger regional cooperation will be essential to strengthen resilience. Initiatives such as the could help countries balance electricity supply and demand, integrate larger volumes of renewable energy, and improve overall system flexibility while lowering costs.
The report argues that diversification has become a strategic imperative for Southeast Asia, with renewable energy, electrification, and energy efficiency emerging as the most effective tools to reduce dependence on imported fuels.
Investments in renewables, electrification, and efficiency improvements have already saved the region an estimated $30 billion in fuel import costs in 2025 alone.
Renewable energy capacity, which stood at around 120 gigawatts in 2024, is projected to nearly triple by 2035 under existing policy settings and could increase fivefold if governments fully implement their announced energy transition targets.
Indonesia is expected to play a pivotal role in that transformation. In addition to possessing some of the world’s largest geothermal resources, the country remains a leading global supplier of nickel, a critical mineral used in electric vehicle batteries and clean energy technologies.
The IEA projects that battery manufacturing capacity across Southeast Asia will more than triple by 2030, while electric vehicle production capacity could increase more than tenfold, supported by industrial policies and rising foreign investment.
Electricity is becoming increasingly central to the region’s economic future. Demand is already growing twice as fast as overall energy consumption, driven by expanding air-conditioning use, digital infrastructure, data centers, industrial electrification, and electric mobility.
Electric vehicle sales in Southeast Asia more than doubled in 2025 to around half a million units, accounting for nearly one-fifth of total vehicle sales. Higher fuel prices and stronger policy incentives are expected to accelerate that trend further.
Despite the momentum, major challenges remain. Around 120 million people across Southeast Asia still lack access to clean cooking solutions, while significant investment is needed in electricity grids, energy storage systems, and other enabling infrastructure.
The IEA concludes that the Middle East conflict represents both a stress test for Southeast Asia’s current energy system and a catalyst for accelerating long-term structural change.
“How Southeast Asia responds to this crisis will be pivotal not only for the region’s resilience but also for the future direction of the global energy system,” the agency said.
For a region increasingly central to global economic growth, the stakes have never been higher. (AT Network)
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