On Tuesday, the International Energy Agency (IEA) published a major report sounding the alarm over the stark energy security vulnerabilities that the ongoing Iran conflict has laid bare for Southeast Asia, warning that failure to speed up energy source diversification could leave the region facing hundreds of billions of dollars in extra costs by mid-2030s.
The report frames the conflict as a critical “stress test” for Southeast Asia’s existing energy infrastructure, highlighting that the region’s heavy overreliance on oil and gas shipments passing through the Strait of Hormuz has left it exceptionally exposed to sudden market shocks and supply disruptions triggered by Middle East tensions. IEA Executive Director Fatih Birol called the crisis a clear wake-up call that makes energy supply and source diversification an urgent central policy priority for the entire region.
Without rapid, sweeping systemic reform, the IEA projects that Southeast Asia’s total energy import bill will triple from $80 billion in 2024 to $245 billion by 2035. The energy shock triggered by the war has already driven sharp increases in household energy costs and pushed regional inflation higher. In a setback to long-term global fossil fuel phase-out efforts, the crisis has also forced many regional governments to reverse course and increase reliance on coal to stabilize energy supplies during the shortage, the report notes.
While the conflict has created significant near-term disruption, it has also acted as a powerful catalyst for accelerating the clean energy transition that was already gaining momentum across the region. The report documents clear shifts already underway: sales of electric vehicles (EVs) have more than doubled in 2025, hitting roughly 500,000 units, meaning one in every five new cars sold across Southeast Asia is now electric. Just last month, Laos implemented an import ban on all fuel-powered vehicles for the remainder of 2026, a policy designed to slash costly oil imports and speed up the transition to electric transportation.
Renewable energy adoption has also surged in response to skyrocketing fossil fuel prices. In the Philippines, which declared a national energy emergency amid the crisis, consumers have turned to residential rooftop solar at record rates as a decentralized, do-it-yourself solution to rising utility bills. Ivan Cano, a representative of Manila-based solar firm EcoSolutions, noted that the region is seeing an unprecedented demand shock for small-scale renewable systems. The IEA data confirms this trend: the Philippines became the world’s second-largest market for Chinese solar exports in the first quarter of 2026, with imports three times higher than the same period in 2025.
The conflict has also renewed government interest in developing nuclear power across Southeast Asia, with Indonesia, Vietnam, and the Philippines furthest along in their planning processes. Still, the report cautions that long lead times for construction and complex regulatory approval processes mean nuclear power will not deliver near-term energy security gains, with full commercial operation timelines remaining uncertain for all three projects.
Even with a tentative deal in place to end the Iran war, industry analysts agree that fossil fuel prices will likely remain elevated for the foreseeable future, creating sustained pressure to expand clean energy deployment. “Southeast Asia is at a clear crossroads,” explained Sam Reynolds, an analyst at the U.S.-based Institute for Energy Economics and Financial Analysis (IEEFA). Sue-Ern Tan, head of the IEA Regional Cooperation Centre based in Singapore, added that the energy shock has prompted not just short-term emergency fixes, but a deep, long-overdue reassessment of national policy priorities and infrastructure investment strategies across the region.
To address the systemic vulnerabilities laid bare by the crisis, the IEA says the core priority for regional governments is cutting overall demand for imported fossil fuels. Key recommendations include upgrading and modernizing national power grids to handle higher shares of variable renewable energy, boosting targeted investment across all renewable technologies including solar, wind, hydro, and geothermal power, and advancing long-planned regional energy integration initiatives such as the ASEAN Power Grid. Birol expressed hope that the urgent wake-up call from the current crisis will help regional governments overcome the political disagreements that have delayed the cross-border grid project for years.
The report concludes that the Iran conflict is both a major stress test for Southeast Asia’s energy system and an unexpected catalyst to speed up much-needed structural reform to build a more resilient, sustainable energy future for the region. This reporting from the Associated Press on climate and energy issues receives funding from multiple private foundations, with the AP retaining full editorial control over all content.