The International Energy Agency (IEA) warns that Southeast Asia faces sharply rising energy costs due to disruptions linked to the Iran conflict. Without accelerated diversification, the region's annual energy import bill could triple from $80 billion in 2024 to $245 billion by 2035.
The conflict in Iran has exposed significant energy security vulnerabilities in Southeast Asia, potentially leading to a tripling of import costs by 2035 if diversification efforts are not accelerated.
The war in Iran has served as a significant 'wake-up call' for Southeast Asia's energy sector, exposing vulnerabilities stemming from an overreliance on oil and gas transported through the Strait of Hormuz, according to a report by the International Energy Agency (IEA).
The conflict has led to higher energy bills and rising inflation across the region, prompting a reassessment of energy security strategies. While the war is spurring changes such as increased sales of electric vehicles, a renewed interest in nuclear power, and a boom in rooftop solar installations, the IEA warns that more comprehensive reforms are necessary.
Without accelerated diversification of energy sources and supply routes, Southeast Asia's energy import bill is projected to triple from $80 billion in 2024 to $245 billion by 2035. The report notes that the crisis has, paradoxically, reinforced the short-term need for coal during energy shortages, potentially hindering fossil fuel phase-out efforts.
Countries like Indonesia, Vietnam, and the Philippines are exploring nuclear power, though construction and regulatory processes present challenges. In the Philippines, consumers have turned to rooftop solar at record rates, making it the second-largest destination for Chinese solar exports in early 2026. Electric vehicle sales have also surged, with Laos implementing a ban on fuel-powered vehicle imports for the remainder of 2026.
The IEA emphasizes that reducing overall demand for imported fossil fuels through grid efficiency and increased investment in renewables like solar, wind, hydro, and geothermal power is crucial for overcoming these vulnerabilities. The conflict is viewed as both a stress test and a catalyst for essential structural changes in the region's energy landscape.