Houthis blockade Red Sea, deepening Asia energy crisis
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- Yemen's Houthis blockaded Saudi shipping through the Bab al-Mandab strait at the southern entrance to the Red Sea, targeting at least two Saudi oil tankers exiting the Red Sea last week and attacking Saudi oil infrastructure this week, with Bab al-Mandab transit falling to its lowest level in months.
- Japan, the Philippines, Thailand, and South Korea — which rely on Middle East oil for up to 90% of imports — are scrambling to secure supplies, with South Korea quickly extending fuel tax cuts and Japan already spending billions on fuel subsidies.
- Saudi Arabia now routes more than 70% of its crude oil exports through the Red Sea port of Yanbu after rerouting from the Gulf during March's Strait of Hormuz closure, a wartime lifeline to China, India, Japan, and South Korea that is now directly threatened.
- War risk premiums for tankers doubled in the past week, and VLCCs cannot transit the Suez fully loaded, forcing partial unloading and use of Egypt's Sumed pipeline — costs that "will inevitably be passed on to consumers in Asia," per shipping analysts.
- Japan, South Korea, and Chinese refiners are turning to Russian crude to fill the gap, with Japan and South Korea reportedly buying Russian oil for the first time since 2022 and Chinese buyers ramping up purchases of sanctioned Russian crude in the past week.
- The Philippines, India, and South Korea are bolstering strategic reserves of oil and gas, while the earlier Hormuz crisis already forced coal-fired power plants back online, a four-day work week in Sri Lanka, and work-from-home orders in Vietnam.
- Ahmed Helal of the Asia Group says countries are "scraping at the bottom of the barrel" in global reserve capacity with "very little inventory now," warning of business closures, peak-hour consumption cuts, and a heightened risk of default.
Why it matters: Asian governments face a compounded energy shock — a second major Middle East supply disruption in six months — with reserves already drained, war risk premiums for tankers doubling in a week, and alternative routes adding weeks of voyage time. Higher inflation and extended fuel subsidies will hit households and government budgets, while Russia absorbs redirected trade.
