The Strait of Hormuz disruption is doing more than raising fuel prices across India, Indonesia, Bangladesh, and the Philippines — it is pushing governments to reverse hard-won clean-energy commitments and fall back on coal. India, which imported 87.4% of its crude oil needs in fiscal year 2023–24 with 54% sourced from Middle Eastern suppliers, is lifting coal production targets and delaying power-plant retirements. Indonesia, whose coal plants already supply 61% of national electricity, faces pressure to expand captive coal capacity even as its Just Energy Transition Partnership (JETP) mandates a phase-down. The International Monetary Fund warns that a sustained 10% rise in global oil prices can cut GDP in oil-importing economies across South and Southeast Asia by 0.3–0.5 percentage points within a year.
The immediate cost is measurable; the long-term cost is the real threat. Infrastructure built or extended now in response to this crisis will still be burning fossil fuels in 2050.
The queues at petrol stations and the shuttered restaurants are the visible symptoms. The deeper injury is structural: a supply shock originating in the Strait of Hormuz is quietly rewiring the energy investment decisions of the two most populous nations on earth, and the consequences will outlast the crisis by decades.
India and Indonesia were, until this year, among the most watched clean-energy transition stories in the world. India had committed to 500 GW of non-fossil electricity capacity by 2030. Indonesia had signed a US$20 billion JETP at the G20 Bali summit in November 2022. Both targets remain on paper. On the ground, coal production ceilings are being raised, plant retirements are being deferred, and subsidies are flowing toward the fuels that caused the vulnerability in the first place.
Across South and Southeast Asia — from Bangladesh’s rationed diesel for rice farmers to the Philippines’ declared energy emergency in March — the same pattern is repeating: short-term security logic is overriding long-term climate logic. The region’s aviation sector is already buckling, with roughly 13,000 flights cancelled across Asia-Pacific in May alone as jet fuel costs and supply chains fracture under the Hormuz shutdown. That disruption is the acute version of a chronic problem that this crisis is now accelerating.
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The details
Fatih Birol, Executive Director of the International Energy Agency, warned in March 2026 that renewed Hormuz tensions could trigger a “double shock” for Asian importers — raising both fuel and electricity prices simultaneously, and slowing clean-energy investment if governments respond by subsidising fossil fuels. That scenario is now unfolding across multiple economies at once.
In India, a 20% drop in gas supply is forcing energy-intensive industries — glass production being among the most affected — to cut output by around 40%, because industrial furnaces cannot operate efficiently below their design fuel threshold. Rural households are reverting to firewood and solid fuels as liquefied petroleum gas (LPG) fails to reach villages. The Indian government maintains that overall energy supply is secure, but prices have risen sharply and restrictions on industrial gas use are in force.
Bangladesh has been among the hardest-hit countries. Diesel rationing has extended to farmers, with irrigation pumps for rice paddies going dry at a critical growth stage. Across ASEAN member states, approximately 40% of oil imports and 62% of gas imports originate from Gulf producers, according to regional energy trade data — a dependency that left little buffer when Hormuz flows tightened.
Indonesia is absorbing the shock differently. Its electricity grid runs primarily on domestic coal, so it faces a price crisis rather than a supply crisis. Jakarta has committed an estimated US$6 billion in fuel subsidies for 2026 to prevent the kind of street protests that have historically followed pump-price increases in the country. South Korea, badly affected by the crisis, is seeking to import additional coal and gas from Indonesia in the short term — demand that Indonesian coal producers are positioned to meet, even as the government’s own JETP commitments require the opposite trajectory.
Vibhuti Garg, South Asia Director at the Institute for Energy Economics and Financial Analysis, argued in February 2026 that India’s structural dependence on imported fossil fuels exposes it to “recurrent price shocks” and that redirecting subsidies toward domestic renewables and battery storage would improve both energy security and the trade balance over the medium term. The current crisis has not yet produced that redirection.
| Economy | Gulf import share | Coal in power mix | Primary crisis response |
|---|---|---|---|
| India | 54% of crude oil (FY2023–24) | Dominant (with coal-fired capacity being extended) | Raised coal targets; industrial gas restrictions |
| Indonesia | Significant gas exposure | 61% of electricity generation (2023) | US$6bn fuel subsidies; new captive coal plants |
| Bangladesh | ~40% of oil; ~62% of gas (ASEAN average) | Rising coal use as LNG unaffordable | Diesel rationing; farm irrigation at risk |
| Philippines | High oil import dependence | Coal-heavy grid | Energy emergency declared March 2026; Russian oil exemption sought |
| Japan | Significant LNG exposure | Coal and LNG mix | US$10bn regional support pledge; nuclear restart accelerated |
How the clean-energy commitments are being hollowed out
India’s updated Nationally Determined Contribution under the Paris Agreement — lodged with the UNFCCC and targeting a 45% reduction in emissions intensity from 2005 levels by 2030 — sits alongside a 2024–2030 National Green Hydrogen Mission that earmarks roughly US$2.1 billion in incentives to reduce imported fossil fuels in industry and transport. Uptake remains nascent. India’s CO2 emissions from fuel combustion reached approximately 2.9 gigatonnes in 2023, up roughly 7% from 2022, driven primarily by coal-fired power, according to the IEA’s CO2 Emissions 2024 report. Indonesia emitted around 690 million tonnes of CO2 from energy in the same year, with coal accounting for more than 60% of that total.
Both countries sit among the world’s top ten coal consumers. Their continued expansion of coal capacity — even if framed as temporary crisis management — directly complicates the global 1.5°C pathway. Infrastructure decisions made in 2026 carry operating lifespans of 25 to 40 years; a coal plant approved this year will still be generating emissions in 2060.
China offers the counterintuitive comparison. Despite being the world’s largest oil importer, Beijing buys from diversified origins and holds substantial strategic reserves. The IMF forecasts 4.4% GDP growth for China in 2026, partly because policy support is absorbing the shock — and because China’s early, large-scale investment in solar manufacturing has given it a degree of insulation that India and Indonesia have not yet achieved. That gap in preparation, not geography, is the real lesson of this crisis.
Beyond the headline
The bigger picture
This shock is less about a single chokepoint and more about how Asia’s growth model still assumes abundant, underpriced fossil fuels delivered reliably and on time. Hormuz disruptions simply expose how slowly financial systems, infrastructure, and politics are reorienting toward efficiency, demand management, and renewables compared with the pace of economic expansion. The crisis is not an external event disrupting an otherwise healthy trajectory — it is a stress test that the current model was always going to fail.
The reach
Persistent fuel tightness in India and Indonesia will feed into higher shipping, fertiliser, and manufactured-goods costs, which will reach supermarket shelves in Europe and North America within months. Automakers, electronics brands, and data-centre operators headquartered in the United States or European Union but dependent on Asian production face both margin pressure and reputational risk if their suppliers respond by leaning harder on cheap coal power rather than diversifying energy sources or accelerating decarbonisation.
Our take
The instinctive response — doubling down on domestic coal and subsidising fuel — solves today’s queues at the pump but deepens tomorrow’s vulnerability. Governments in India, Indonesia, and their neighbours should use this crisis to accelerate grid investment, storage deployment, and regional power trade instead. Western governments and investors share direct responsibility: continuing to finance fossil-heavy projects across South and Southeast Asia while announcing net-zero targets at home is not merely hypocritical — it entrenches exactly the fragility this shock has laid bare.
What this means for investors, businesses, and travellers in the region
With Hormuz disruptions ongoing and no confirmed timeline for normalisation, companies and individuals with exposure to India, Indonesia, Bangladesh, or the Philippines face immediate decisions across several categories.
- Track the OPEC+ mid-2026 ministerial output decision: If Gulf producers maintain or deepen production cuts, Dubai crude and Qatar LNG benchmarks will remain elevated, prolonging industrial rationing in India and fuel subsidy pressure in Indonesia. An output increase or eastward cargo redirection would ease rationing risks and stabilise growth forecasts from the Asian Development Bank and World Bank. Watch for the announcement, expected mid-2026.
- Monitor India’s coal production ceiling revisions: The Ministry of Coal’s quarterly production targets are the clearest leading indicator of how far New Delhi is willing to reverse its clean-energy trajectory. Upward revisions signal that the 500 GW non-fossil target by 2030 is slipping. India’s Ministry of Petroleum and Natural Gas publishes updated import and production data through the Petroleum Planning & Analysis Cell at ppac.gov.in.
- Watch Indonesia’s JETP implementation for captive-plant exemptions: The JETP investment plan endorsed in late 2023 prohibits new on-grid coal projects, but industrial captive plants operate in a grey zone. Each new exemption granted to PLN or private industrial operators extends coal lock-in by decades. The JETP Indonesia secretariat publishes plan updates at jetp-id.org.
- Assess supply-chain exposure to coal-heavy grids: Companies sourcing electronics, textiles, or processed goods from factories in Indonesia, Bangladesh, or Vietnam should audit the energy source of their suppliers’ power contracts. A supplier running on captive coal power carries both carbon-accounting risk under incoming EU supply-chain due-diligence rules and operational risk if coal prices spike again.
- For travellers: Domestic flight disruptions across India, Indonesia, Thailand, and the Philippines remain elevated. The aviation fuel shortage that drove approximately 13,000 flight cancellations across Asia-Pacific in May 2026 has not fully resolved. Check airline operational advisories before booking connections through Delhi, Jakarta, Manila, or Bangkok hubs, and allow extended layover margins on itineraries that depend on tight connections.
