This article first appeared on Aurora Insights.
THE U.S.-Israeli strikes on Iran have sent oil to near US$120 a barrel early this week, paralysed Gulf air freight, and exposed the region’s dangerous dependency on a single chokepoint. Waiting for clarity is not a strategy.
14 days ago, the Middle East changed irrevocably. On February 28, U.S. and Israeli forces launched nearly 900 strikes in twelve hours, killing Supreme Leader Ali Khamenei and dismantling the Iranian military’s command infrastructure. Brent crude surged to near $120 a barrel early this week, and is hovering around $100 to $113 per barrel. Gulf airports are shuttered, the Strait of Hormuz is officially closed. And Southeast Asia, a region that neither fired a shot nor cast a vote on this conflict, is absorbing the shock in real time.
This is not a distant war. For companies across the ASEAN region, the Iran conflict is already a direct business event. The question is no longer whether it will affect you. The question is whether you are moving fast enough.
THE PRICE OF DEPENDENCY
Southeast Asia built its growth model on cheap energy, integrated supply chains, and the free flow of goods through the world’s most trafficked waterways. That model is now under pressure on every front simultaneously.
Thailand is one of the most exposed economies in the region, with 74% of its oil from the Gulf. As Asia’s largest net oil importer relative to GDP—with net imports running at 4.7% of GDP—every 10% rise in crude prices costs roughly half a percentage point on its current account. The arithmetic is painful. The baht is weakening. Inflation is being imported.
The Philippines, Vietnam, and Indonesia face a compounding crisis that goes beyond crude prices. China, protecting its own strategic reserves, has ordered major refineries to halt diesel and petrol exports. Beijing’s decision to hoard refined products has quietly transformed a Gulf supply shock into a pan-Asian supply crisis. This is the hidden story of the past 14 days, and most boardrooms in the region have not yet grasped its full implications.
Malaysia stands in a different position: as an energy exporter, it is a relative beneficiary of higher prices. But even Kuala Lumpur cannot insulate itself from the air freight paralysis, the weakening of regional consumer demand, and the knock-on effects of disrupted neighbours.
AIR FREIGHT: THE SILENT COLLAPSE
The closure of Dubai International—the world’s busiest cargo hub—has idled nearly 1/5 of global airfreight capacity. The effects are cascading through supply chains that were never designed to accommodate this kind of shock. Consumer electronics, pharmaceuticals, medical devices, and precious metals are all backing up. Air cargo rates from Asia to Europe have jumped 45% as aircrafts have to thread between Iranian and prohibited Russian airspace on routes that add hours to every flight.
For Southeast Asian manufacturers supplying just-in-time components to global assembly chains, this is not merely a cost problem. It is a contract performance problem. Force majeure clauses are already being triggered. Bahrain’s state oil company, Bapco Energies, has already declared force majeure on operations. More will follow. Every company in the region needs its legal team reviewing its contracts today, not next week.
FERTILIZER, FOOD, AND THE SLOW-BURN RISK
There is a third shock that is moving more slowly but may prove just as consequential: fertilizer. Three of the world’s top ten producers of urea and anhydrous ammonia—Saudi Arabia, Qatar, and Iran—are either in the conflict zone or have suspended exports under sanctions. Urea prices rose roughly a quarter last week alone.
For an agricultural region producing rice, palm oil, and rubber for global markets, this is not an abstract commodity price movement. It is a direct hit to production costs arriving in the same quarter as rising diesel prices for farm machinery and transport. Governments that have already stretched their fiscal capacity managing post-pandemic debt will have limited room to absorb and buffer these costs for their farmers.
WHAT MUST BE DONE—AND WHEN
Let me be direct: the window for action is closing. Here is what companies across the region must prioritise, in order of urgency.
First, hedge fuel and energy costs now. Forward contracts that were available at reasonable premiums two weeks ago are becoming expensive. In another two weeks, they may be prohibitively so. Energy-intensive manufacturers, logistics operators, and agribusinesses should be treating this as a treasury priority, not an operational footnote.
Second, build inventory buffers on critical inputs. Map every component, chemical, or raw material that moves through Gulf logistics corridors or transits Dubai. Then build a 60 to 90 days buffer where feasible. The cost of carrying extra inventory is negligible compared to the cost of a production halt.
Third, reroute and rebook freight capacity immediately. Pacific routing alternatives exist, but capacity is finite and filling fast. Freight forwarders are overwhelmed. Companies that move now will secure space; those that wait will pay premium rates for whatever is left.
Fourth, reprice products proactively. Companies that delay adjusting their pricing to reflect higher input costs will face margin compression that compounds over months. Customers who are informed of the geopolitical basis for price adjustments are far more receptive than those who receive unexplained increases later.
Fifth, protect your people. Tens of thousands of Southeast Asian workers are employed across the Gulf. Governments from Jakarta to Manila are already running evacuation operations. If your company has staff in the region, you need an active duty-of-care plan, not just a hotline number.
THE STRATEGIC HORIZON
Looking beyond the immediate crisis, this conflict is forcing a reckoning with structural vulnerabilities that have been accumulating for years. Southeast Asia’s overexposure to Middle Eastern energy, its reliance on Gulf logistics infrastructure, and its dependency on Chinese refined products have all been laid bare in two weeks.
The companies that will emerge from this period in the strongest competitive position are those that use the crisis as the forcing function for diversification they should have undertaken years ago: alternative energy suppliers from West Africa, Australia, and the Americas; redundant logistics routes; and supplier bases that do not all thread through the same geographic chokepoints.
The conflict’s political trajectory remains deeply uncertain. Washington is demanding unconditional surrender from what remains of the Iranian government. U.S. intelligence assessments suggest that a decapitation strike is unlikely to produce a rapid collapse of the Iranian state apparatus. A protracted conflict—lasting months, not weeks—is the base case. Companies should plan accordingly.
Southeast Asia did not choose this conflict. But it will be shaped by how its companies and governments respond to it. The region has navigated shocks before—the Asian financial crisis, SARS, the pandemic, the Ukraine war’s commodity spike. Each time, the businesses that treated the crisis as a moment for structural adaptation came out ahead.
This is that moment. The starting gun has already fired.
Aurora Insights is a geopolitical risk analysis company that delivers strategic insights on Asia. We help business leaders & policymakers make informed decisions and advance their mission in a way that is sustainable, inclusive, forward-looking
