Asia’s real energy test

The past four months have demonstrated just how volatile oil markets can be. In March, Brent crude climbed above $100 a barrel for the first time in four years, reaching $119 on March 9—its highest level since the 2022 energy crisis—as Iran’s closure of the Strait of Hormuz brought tanker traffic to a near-standstill. Prices remained elevated for months and were still above $105 in mid-May.

After the United States and Iran agreed to a ceasefire in June and began negotiations on a permanent settlement, the Strait gradually reopened, though the process has been repeatedly interrupted by renewed clashes. As a result, prices declined sharply, falling into the low $70s by late June, before ticking up again with the resumption of hostilities.

These dramatic swings have provided a real-world stress test for energy-importing economies, particularly the ASEAN+3 countries. With roughly 84% of crude shipments through the Strait of Hormuz destined for Asian markets, and China sourcing nearly 50% of its oil imports through that single chokepoint, the region bore the brunt of the global energy shock.

While the debate about energy resilience understandably focuses largely on how well economies can withstand high oil prices, the more important question is how well they cope with persistent volatility. This year’s price whiplash suggests that resilience hinges on institutional preparedness: improving energy efficiency, reducing oil dependence, maintaining adequate reserves, and preserving sufficient policy space to absorb price spikes.

Governments can prepare for persistently high energy prices, but they cannot anticipate every possible market outcome. What they can do is build institutions that remain effective across a wide range of scenarios. Resilience, in other words, should be measured less by how economies cope with a single shock than by their capacity to function through successive bouts of uncertainty.

Oil shocks also have a paradoxical effect. In the short run, supply disruptions often push countries back toward coal and other fossil fuels as energy security temporarily takes precedence over decarbonisation. Over time, however, recurring bouts of volatility strengthen the economic case for diversifying energy sources and accelerating the transition to renewables.

But resilience rests on capital allocation as much as it does on energy policy. If policymakers and investors treat price spikes as temporary disruptions, capital will continue to flow toward fossil fuels. If, instead, they view repeated bouts of volatility as evidence of a chronic condition, capital is more likely to shift toward clean energy.

The same principle applies to electricity demand: policymakers must distinguish between what dominates news headlines and what matters most. While AI and data centers place significant pressure on local electricity grids, their contribution to national and global electricity consumption remains modest. The International Energy Agency estimates that data centers accounted for roughly 1.5% of global electricity demand in 2024 and projects that, even with rapid AI adoption, their share will remain below 3% by 2030.

By comparison, space cooling already accounts for roughly 10% of global electricity consumption. Europe’s back-to-back heat domes in May and June forced two French nuclear reactors to shut down because the river water used for cooling had become too warm, placing additional strain on electricity systems across the continent. As temperatures continue to rise, this challenge is likely to become even more acute.

Nowhere is this more evident than in Southeast Asia. According to the IEA, the region’s stock of air conditioners is projected to increase from nearly 50 million units in 2020 to around 300 million by 2040. Electricity demand for space cooling is expected to reach about 300 terawatt-hours—roughly equivalent to the combined electricity consumption of Indonesia and Singapore. Over the coming decade, cooling will place far greater pressure on regional power systems than AI.

The broader lesson is clear: resilience requires distinguishing structural signals from localised noise, rather than reacting to whichever issue dominates the news cycle. Governments that mistake AI for their principal grid constraint risk investing in the wrong means of boosting resilience.

Electrification is a case in point. The IEA’s Electricity 2026 report projects that electricity’s share of final energy consumption will rise from 21% in 2025 to 24% by 2030, with emerging economies—led by China, India, and Southeast Asia—accounting for nearly 80% of additional global demand growth.

For ASEAN+3, this represents both an opportunity and a challenge. Greater electrification, supported by renewable energy sources, reduces exposure to oil-price shocks. But it also requires sustained investment in generation capacity and grid resilience as the region absorbs a disproportionate share of the growth in global electricity demand over the next five years.

Greater electrification, supported by renewable energy sources, reduces exposure to oil-price shocks. But it also requires sustained investment in generation capacity and grid resilience as the region absorbs a disproportionate share of the growth in global electricity demand over the next five years.

Resilience will increasingly depend on regional cooperation. The ASEAN Power Grid initiative, for example, facilitated the cross-border exchange of more than 38,000 gigawatt-hours of electricity through projects such as the Lao PDR-Thailand-Malaysia-Singapore Power Integration Project between 2016 and 2022, thereby demonstrating what institutional preparedness looks like in practice. Scaling these efforts, as envisaged in ASEAN’s 2026-2030 energy-cooperation plan, would strengthen the region’s collective capacity to absorb future energy shocks.

To be sure, no economy can ever be truly insulated from global energy markets. But deeper regional integration would allow countries to share those risks, so that no single economy has to bear the full impact of an external shock.

ASEAN+3 countries’ growing reliance on intraregional demand has already strengthened their resilience. These 14 countries now account for more than one-quarter of global demand, most of it generated and absorbed within the region.

Yet resilience requires continual reinforcement. That means resisting complacency during a temporary price drop and investing in the unglamorous business of diversifying energy sources, expanding transmission networks, and preserving the fiscal and monetary-policy space needed to respond to the next disruption.

Whether the next global shock is driven by geopolitical conflict, technological disruption, climate change, or financial instability, its effects will almost certainly be uneven, testing the buffers ASEAN+3 countries have built in calmer times. As disruptions become more frequent and severe, resilience is no longer about predicting the next crisis, but about building economies that can weather it, whenever—or wherever—it strikes.

Yasuto Watanabe is Director and CEO of ASEAN+3 Macroeconomic Research Office (AMRO).