The Red Sea Bottleneck: Asia's Energy Security Evaporates

Asian economies are discovering the hard limits of their energy security as another Middle Eastern maritime artery faces severe disruption. With Houthi militants in Yemen enforcing a blockade on Saudi Arabian shipping through the Bab al-Mandab strait, governments in Tokyo, Seoul, and Manila are confronting their second major supply crisis in just six months. The reliance on the Middle East for up to 90 percent of their crude oil imports has transformed from a standard trade relationship into an acute economic vulnerability.

The current bottleneck is a direct consequence of earlier geopolitical maneuvers. When the strait of Hormuz was effectively closed by Iran in March, Riyadh engineered a logistical pivot by redirecting crude exports to Yanbu, a port on the Red Sea coast. This terminal quickly grew to handle more than 70 percent of Saudi oil exports, temporarily pacifying anxious buyers in China, India, Japan, and South Korea. That relief proved fleeting. Following Houthi attacks on at least two Saudi tankers and domestic oil infrastructure over the past week, transit volumes through the Bab al-Mandab have plummeted.

Forced to bypass the southern Red Sea, shipping companies face an expensive logistical labyrinth. Some refiners are attempting to route cargo north through the Suez Canal, a solution that introduces its own set of inefficiencies. Fully loaded Very Large Crude Carriers cannot navigate the canal. Operators must discharge half their cargo in the Red Sea, pump it through Egypt’s Sumed pipeline to the Mediterranean, and reload it on the other side. Alternatively, vessels can detour around the Cape of Good Hope, doubling the voyage time. Either choice involves massive freight and fuel expenditures, compounded by war risk insurance premiums that have doubled in a matter of days.

Market trackers at Kpler note that tanker operators are clearly altering their routes in response to the physical risks. The financial burden of these detours will inevitably fall on Asian consumers. To mask the inflationary impact, regional governments are resorting to their favoured, budget-draining tool: state subsidies. Japan and South Korea are extending fuel tax cuts and spending billions to artificially suppress petroleum prices. Yet, as analysts from the Asia Group point out, global reserve capacities are essentially exhausted, raising the prospect of business closures, higher default risks, and peak-hour energy rationing.

The desperation is palpable in the scramble for alternatives. Previous supply shocks this year already forced a return to coal-fired power plants, triggered a four-day working week in Sri Lanka, and prompted work-from-home mandates in Vietnam. Now, the Philippines, India, and South Korea are rushing to stockpile strategic reserves while simultaneously pushing for a faster transition to renewable energy sources.

When basic economic survival dictates policy, diplomatic sensitivities quickly fade. Facing empty tanks and domestic unrest, Asian importers are quietly turning to alternative suppliers. According to reports cited by Reuters, Chinese refiners have accelerated their procurement of sanctioned Russian crude. Earlier this year, both Japan and South Korea resumed purchases of Russian oil for the first time since the 2022 invasion of Ukraine. Governments are learning that while supply chains can be remapped on paper, the physical reality of securing energy in a fractured world offers no easy escapes.

Written by Martina Kirchner martina.kirchner@alpineweekly.com