KOTA KINABALU: A war in the Middle East is rapidly becoming Southeast Asia’s economic crisis, as oil shocks, trade disruptions and policy pressure test ASEAN’s resilience like never before.

When the United States and Israel launched Operation Epic Fury on 28 February 2026, few in Southeast Asia expected the shockwaves to arrive so swiftly. Three weeks later, oil is trading near USD100 a barrel, the Strait of Hormuz remains effectively restricted, ASEAN has convened emergency meetings, and governments across the region are scrambling to protect their economies. This is not a distant war. For Southeast Asia, it has already arrived.

The joint US-Israeli military campaign against Iran—launched without a formal declaration of war and announced by President Donald Trump via an eight-minute video on Truth Social at 2am Eastern Time on 28 February—was framed in Washington as a targeted operation to dismantle Iran’s ballistic missile programme and nuclear infrastructure. Within hours, it had evolved into something far larger: a conflict spanning multiple Middle Eastern theatres, disrupting the world’s most critical energy corridor, and sending economic tremors into import-dependent economies across Asia.

Southeast Asia did not choose this war. But it is paying for it.

ASEAN Speaks — But Divisions Show

The bloc’s first formal response came on 4 March, when ASEAN Foreign Ministers issued a statement expressing “serious concern” over the escalating conflict and calling on all parties to respect international law and adhere to the United Nations Charter. The statement noted, pointedly, that the escalation was “particularly regrettable as it occurred amid ongoing diplomatic efforts”—a reference to Oman-mediated talks that were reportedly nearing agreement when the strikes began.

On 13 March, with economic pressure mounting, the Philippines—as ASEAN Chair—convened a special meeting of ASEAN Foreign Ministers via videoconference, attended by ASEAN Secretary-General Dr Kao Kim Hourn. The same day, ASEAN Economic Ministers held their 32nd Retreat in Manila, warning of the region’s energy vulnerability and calling for urgent strengthening of supply chain resilience.

Philippine Foreign Affairs Secretary Ma Theresa Lazaro, who chaired the emergency meeting, was direct:
“We expressed serious concern over the situation in the Middle East and its impacts in the region, and emphasised the importance of the immediate cessation of hostilities.”

She added that ASEAN had called on all parties to exercise the utmost self-restraint.

The economic ministers went further, highlighting Southeast Asia’s exposure to global oil and LNG supply disruptions. They called for reinforcing supply chain resilience, accelerating renewable energy transitions, and activating regional mechanisms to mitigate economic fallout.

“This is not a distant war for Southeast Asia. The consequences are arriving fast and close—through energy prices, shipping costs, currency pressures, and the quiet fear that things could get worse before they get better.”

Yet beneath the language of unity, familiar ASEAN fault lines surfaced. Malaysia issued the region’s strongest condemnation. Prime Minister Datuk Seri Anwar Ibrahim described the Israeli strikes as “a vile attempt to sabotage ongoing negotiations,” calling for an “immediate and unconditional cessation of hostilities.”

Indonesia, Thailand and others maintained more measured responses, while Singapore urged a return to diplomacy. The contrast reflects a region still navigating how firmly—and how visibly—to position itself.

US economist Jeffrey Sachs, speaking in Putrajaya on 16 March, urged ASEAN leaders to act collectively:
“All ASEAN leaders should say: this hurts us, this hurts the world, this needs to stop.”

The Hormuz Chokepoint: Asia’s Energy Jugular

The Strait of Hormuz—just 21 nautical miles wide at its narrowest—carries approximately 20 percent of global oil supply. Since 28 February, Iran has effectively restricted passage, deploying explosive drone boats and issuing direct threats to vessels. At least 12 ships have been struck in surrounding waters.

A Thai-flagged bulk carrier, Mayuree Naree, was hit on 11 March, leaving three crew members missing and forcing the evacuation of 20 others to Oman.

Around 80 percent of Asia’s oil imports pass through Hormuz. The consequences are immediate. Several ASEAN economies rely on imports for up to 95 percent of crude supply, while Vietnam’s reserves are estimated to last less than 20 days.

Oil prices near USD100 per barrel are already feeding into fuel costs, logistics, aviation, and food prices. The Asian Development Bank has warned of stronger inflationary and currency pressures for energy-importing economies.

Markets have reacted sharply. The MSCI Asia Pacific Index has fallen about 8.6 percent since the conflict began, reflecting the region’s vulnerability.

Malaysia: Buffered, But Not Immune

Malaysia occupies a uniquely complex position. As a net energy exporter, it benefits from higher prices in the short term. Petroleum income is projected to account for 12.5 percent of government revenue in 2026.

The domestic market has shown relative resilience, with smaller declines compared to regional peers.

However, PETRONAS has cautioned that Malaysia remains deeply exposed to global energy dynamics. Rising import costs, logistics pressures and subsidy commitments will transmit quickly into the economy.

The RON95 subsidy is a growing concern. At current levels, the bill could reach RM24 billion this year to maintain the price at RM1.99 per litre.

Economists warn that second-round effects—through inflation, capital flows and investor sentiment—may ultimately define Malaysia’s exposure more than direct trade links.

The Wider Regional Picture: Austerity, Rationing, and Disrupted Trade

Across Southeast Asia, governments are already adjusting. Energy-saving measures, reduced work weeks, and fiscal recalibrations are being introduced.

Trade flows are also under strain. Agricultural exports to the Middle East have slowed, while shipping disruptions continue to affect regional supply chains.

The conflict has extended into Asian waters. A US submarine strike near Sri Lanka marked the furthest geographic escalation so far, underscoring how far-reaching the conflict has become.

A Crisis That Compounds a Crisis

ASEAN was already navigating multiple challenges—from the South China Sea to Myanmar—when this crisis erupted.

While the bloc has responded with urgency, its ability to influence a conflict driven by global powers remains limited.

What ASEAN can do is accelerate long-delayed priorities. Energy diversification, LNG resilience and renewable transition are no longer optional—they are urgent.

There is no clear end in sight. Oil prices remain elevated. The Strait of Hormuz remains tense.

Southeast Asia did not choose this war. But how it responds will define its economic resilience—and its credibility—for years to come. – TNS NEWS

TENGKU NOOR SHAMSIAH TENGKU ABDULLAH is Editor-in-Chief of TNS News and an accomplished media professional and strategic communications consultant with over 30 years of experience across Malaysian and regional media, including print, television, and wire services.