The vulnerable card of energy security has been exposed, the macroeconomic outlook is not optimistic, and Southeast Asian stock markets face a "Black March."

Ask AI · How Will Southeast Asia’s Energy Security Vulnerability Affect Economic Stability?

【Global Times Report, Reporter Ni Hao】Although it is far from the Persian Gulf, Southeast Asia is one of the regions most severely hit in this round of Middle East conflict. With limited oil reserves and extreme dependence on external supply chains, the region has exposed the “fragile baseline” of energy security earlier than other Asian economies. As reported by Nikkei Asia Review on March 31, since the U.S. and Israel launched military strikes against Iran on February 28, the blockade of the Strait of Hormuz has dealt a heavy blow to investors’ confidence in the region’s petrochemical and tourism pillar industries, causing the market value of Southeast Asia’s major stock markets to evaporate by at least $216.9 billion within just one month.

Market Value Evaporated by More Than $200 Billion

Citing the latest statistics from QUICK FactSet, as quoted by Nikkei Asia Review, the report summarizes changes in the stock market market value of six major Southeast Asian economies—including Indonesia, Thailand, Malaysia, Singapore, the Philippines, and Vietnam—over the one-month period from February 27 to March 26. The data show that, at the close on March 26, the combined total market value of the stock markets of the above countries was approximately $1.92 trillion, down sharply by 10.2% from the day before the Middle East situation erupted on February 27, with market value evaporating by more than $200 billion.

Among them, Indonesia’s stock market market value evaporated by $115.5 billion, the largest loss. Thailand ranked next, shrinking by $48.9 billion; the Philippines and Vietnam also saw their market values decline by more than $16 billion each. The benchmark stock indices for these Southeast Asian countries also dropped sharply at the same time; by the close on March 26, the Vietnam Ho Chi Minh Index and the Indonesia Jakarta Composite Index both fell by more than 13% compared with a month earlier.

Due to high dependence on Middle East energy and the impact of the Middle East situation on civil aviation, Southeast Asia’s major oil and tourism listed companies are leading the market decline. Among them, Indonesia’s largest petrochemical company, Chandra Asri Pacific, saw its market value plunge by 27% over the course of a month, shrinking to $25.2 billion. Thailand’s National Oil Company saw its market value fall by 12% to $30 billion.

Multi-Country Buffering Capacity Is Reaching Its Limit

Southeast Asia’s high dependence on the Strait of Hormuz is rapidly turning into a real energy supply crisis. According to The Diplomat, 96% of the Philippines’ oil comes from the Gulf region. The proportions of oil purchased from the Middle East by Vietnam and Thailand are also as high as about 87% and 74%, respectively. This extremely high concentration of imports means that if the shipping route is obstructed, it will directly hit the region’s energy supply resilience.

Reuters reports that currently, multiple Southeast Asian refineries, including those in Singapore and Malaysia, have cut output because of “limited crude oil supply.” According to the Financial Times, as consumers begin to anticipate long-term supply shortages, parts of the Philippines, Indonesia, Thailand, and Vietnam “have already seen panic buying.” Governments in each country are urgently stepping in, setting aside part of their fiscal budgets as fuel subsidies. However, limited fiscal room only allows maintaining existing subsidies for 1 to 2 months. Faced with tight fuel supply, Southeast Asian governments have no choice but to take measures to suppress demand. For example, in Vietnam, authorities have already adopted emergency measures such as lowering tariffs, rolling out energy-saving measures, and encouraging people to work from home.

Besides oil and gas, Southeast Asia’s “grain basket” is also, to some extent, held in the hands of the Middle East. The Persian Gulf is not only an energy hub, but also the source of supply chains that underpin Southeast Asia’s petrochemicals, construction, and agriculture. Indra Ofland, head of energy research at the Norwegian Institute of International Affairs, said, “People often focus on oil and natural gas, yet overlook the Persian Gulf’s role as the core global fertilizer production area—these natural-gas-based fertilizers are essential to the security of Southeast Asia’s food supply chain.” For example, Thailand’s nitrogen fertilizer supply in 2024—about 67%—comes from the Middle East. This means that once supplies are disrupted, the combined effect of higher energy and fertilizer costs will accelerate a rise in food prices in the region.

Economic Growth Momentum Is Being Overall Lowered

As underlying energy and cost pressures spread upward, Southeast Asia’s pillar industry—tourism—has first entered the winter. According to Nikkei Asia Review, over the past month, the market value of Vietnam Airlines has fallen by 21%, to $2.6 billion. The stock price of Thailand Airports, which operates major airports in Thailand, has also dropped by more than 10%.

U.S. media report that annually, 125 million people travel between Europe and Asia, with one-third of travelers going through major airports in the Middle East. As the U.S.-Israel-Iran conflict escalates, the capacity of these key nodes has shrunk significantly, and rerouting, delays, and cancellations are severely limiting passenger flows to and from Southeast Asia. Large-scale flight cancellations, doubled jet fuel costs, and consumers’ reluctance to accept geopolitical risks are casting a shadow over Southeast Asia’s tourism industry recovery prospects.

As a pillar industry of Southeast Asian economies, tourism contributes as much as $374 billion to Southeast Asia’s GDP, accounting for 9.4%. Its slowing growth not only clouds regional growth, but also cuts off an important source of foreign exchange at a time when each country needs it most.

Against the intertwined pressures of industry pains and supply chain stress, the overall macroeconomic outlook for Southeast Asia is not optimistic. Although countries are competing to find alternative energy sources, the continued strengthening of the U.S. dollar further exacerbates the predicament, eroding local currencies’ purchasing power.

In this severe situation, authoritative institutions have successively lowered regional growth expectations. According to Malaysia National News Agency, Maybank, in its latest report, reduced its economic growth forecasts for major Southeast Asian countries while raising inflation expectations for these countries. According to the report, the overall economic growth forecast for the six Southeast Asian countries—Indonesia, Malaysia, the Philippines, Singapore, Vietnam, and Thailand—for 2026 has been cut from 4.8% to 4.5%. Among them, the largest downward revisions were for the Philippines and Vietnam, each lowered by 0.4 percentage points.

At the same time, due to expectations of rising food, fuel, and freight costs, the report raised the overall inflation rate forecast for the six major economies in 2026 from the previous 2.2% to 2.7%. Specifically, Thailand’s inflation rate forecast was raised by 0.8 percentage points, while the Philippines and Indonesia’s inflation rate forecasts were each raised by 0.5 percentage points.