Middle East Conflict Disrupts South Asia's Oil & Gas Supplies

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Written by Megha Rawat for IIR News Intelligence (Sugar Land, Texas)

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Summary

Amid start-and-stop negotiations between the combatants, the U.S.-Israeli war against Iran has triggered the largest-ever disruption to global oil supplies, with South Asia experiencing the most severe consequences. The closure of the Strait of Hormuz, which carries 80% of the crude oil destined for Asian markets, has created acute energy shortages across India, Pakistan and Bangladesh. These countries are heavily dependent on the Gulf for their energy needs and may face significant economic impacts including inflation, food insecurity and industrial slowdowns.

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Critical Energy Chokepoint

The Strait of Hormuz has become the pressure point testing Asia's energy security. The conflict has disrupted roughly 20% of global oil supply. As reported by the Energy Information Administration (EIA), major oil producers including Iraq, Saudi Arabia, Kuwait, UAE, Qatar and Bahrain collectively shut in 10.5 million barrels per day of crude oil production in April due to the ongoing conflict and Hormuz blockade. According to Industrial Info Resources data, there are more than 1,400 active capital Oil & Gas Production projects in the Middle East with a total investment value of US$188 billion.

Multiple energy facilities like Ras Laffan LNG, the Habshan Gas Plant, Ras Laffan GTL and Fujairah Terminal in the Gulf region have sustained severe damage, which is so extensive that normal production may take several months to years to fully recover.

Country-Specific Impacts

India faces disproportionate exposure, with 40-50% of its crude imports and two-thirds of its liquefied natural gas (LNG) imports passing through the Strait of Hormuz. With 330 million households depending on liquefied petroleum gas (LPG), the government has prioritized household fuel over commercial and industrial use, causing production delays for small and medium enterprises. Coal-fired power plants have been directed to operate at maximum capacity to stabilize electricity supply amid the gas shortage.

Pakistan is among the most vulnerable countries, importing 99% of its LNG from Qatar and the UAE. Amid the crisis, the nation's Oil and Gas Regulatory Authority increased re-gasified liquefied natural gas prices significantly, affecting power generation and textile industries.

Bangladesh faces near-total exposure with nearly 100% of crude imports and 70% of LNG imports routed through the Strait. Accounting for nearly 80% of export income, the garment industry is experiencing reduced competitiveness as a result of increasing energy costs and supply uncertainties linked to the Strait of Hormuz blockade.

Energy Security Measures

South Asian countries are implementing a mix of austerity measures, supply diversification, and pricing adjustments to manage the energy crisis triggered by Middle East warfare, which has squeezed supplies and raised prices. For instance, India has reduced excise duties on petrol (gasoline) and diesel fuel and directed refiners to boost LPG production. The country also has diversified its gas supplies on a priority basis. Pakistan and Bangladesh have imposed restrictions on non-essential travel and limited workplace attendance for government office staff.

The Middle East war poses a serious threat to South Asia's energy security, economic stability, and the livelihoods of millions of migrant workers. Immediate priorities include ceasefire diplomacy, coordinated regional energy sharing and protection for migrant workers. Building long-term resilience requires fundamentally diversifying energy sources away from Middle Eastern fossil fuels, developing alternative trade routes and making strategic investments in the renewable energy transition to reduce vulnerability to fossil fuel disruptions. South Asian countries must balance their historical ties with both Gulf Arab states and Iran while positioning themselves as constructive mediators in the crisis.

Key Takeaways

• The Middle East war poses a serious threat to South Asia's energy security.
• The Strait of Hormuz carries 80% of the crude oil destined for Asian markets.
• South Asian countries are implementing austerity measures, supply diversification, and pricing adjustments.

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