Iran is one of the world’s most prominent and important holders of crude oil reserves and natural gas. Although the country has been facing international sanctions from several countries around the world like the USA, UK, The EU, Canada, and Israel, Iran’s oil continuously flows eastwards towards Asia, where the biggest consumer and buyer of Iranian oil is China. Until 2019, India was also a major importer, taking about 10% of its total oil from Iran before stopping purchases under pressure from countries like the USA, Japan, and South Korea. Historically, India and Iran have had strong energy relations with India, importing Iranian oil since the 1990s, and Iran amongst India’s top oil suppliers with imports peaking around 2012-2018. The epicentre of Iranian oil exports lies in the Strait Of Hormuz, a narrow water body that lies between Iran and Oman. Through this strait passes 20% of the world's daily oil. The geopolitical and strategic importance of this strait cannot be overemphasized- it is the heart of energy supply for major parts of Asia. Due to Iran’s repeated threats of blocking/disrupting traffic in the strait, the region instantly becomes fragile and is also subject to the deployment of naval assets by countries like the USA, which has deployed its Fifth Fleet near the Strait.

The most prominent impact of the recent Iran-Israel tensions has been felt in the energy domain. Oil prices which were already volatile due to the Russia-Ukraine war have surged again; crude oil prices jumped above 95$ per barrel after Israeli airstrikes on Iran and shipping insurance costs in the Gulf region have risen as a result of heightened military risk. Asian countries that import over 80% of their respective oil from Iran are seeing high spikes in crude oil prices. For example, India is quite sensitive to crude oil price fluctuations; even a $10 increase in oil prices can raise India’s import cost to billions. Similarly, Japan and South Korea -both lacking significant domestic energy resources - face inflation threats and must plan accordingly if the supply line from Iran gets too unstable. For China, it is a much more complex situation as they had signed a 25 year strategic cooperation in 2021. It also has vested trade and diplomatic interests throughout the Middle East, including Israel and Saudi Arabia. China’s oil requirements are huge, and instability in the Middle East, especially the Gulf region, pose a risk not only to its imports of oil but also to its Belt and Road Initiative (BRI).

Asian countries are now walking a diplomatic line, the Iran-Israel issue is not only about 2 countries, it's also about picking strategic interests, energy needs, and historical alliances. India has had a long history with Israel in the context of defense and intelligence, buying advanced technology and weapons. At the same time, Iran is a key country not only for energy but also regional accessibility. The Chabahar Port project offers India a path to Afghanistan and Central Asia that bypasses Pakistan. China’s position is equally cautious, it benefits from Iranian discounted oil and opposes sanctions from the West, it also values regional stability and economy. Beijing's broader aim is to present itself as a neutral global power broker. However,  any misstep such as excess support to Iran could cause a derailment in relations with Israel. Japan and South Korea, as allies of the USA, are likely to align with Washington’s stance, although both have looked to maintain limited engagement with Iran in the past, especially on humanitarian and oil grounds. The challenge now lies in insulating their economies from oil fluctuations while diplomatically aligned with the West.

Oil has commonly been used as a weapon - both as a method of leverage and retaliation. In the past, Iran has threatened to reduce oil exports or attack assets in the Gulf as retaliation for Israeli or American actions. In April 2024, Iran detained a commercial oil tanker near the Strait Of Hormuz, causing panic amongst shipping companies and raising fear of a blockade. Actions like these demonstrate how quickly the oil “card” can be used as a geopolitical weapon. Due to this, governments are expanding Strategic Petroleum Reserves (SPRs) and also increasing ties with other suppliers of energy like the UAE, Saudi Arabia, and even Russia. However, it won't be simple to switch a country's oil supplier, as Iranian oil has specific characteristics such as being heavy and sulfur rich. Asia’s oil security is dangerously reliant on Middle Eastern stability. To remove this vulnerability, regional countries must take long-term and short-term measures such as investing more seriously in sustainable energy corridors. The Iran-Israel conflict is not merely a conflict, it can be considered a stress test for countries around the globe, especially Asian countries like India, China, and Japan. The stakes are not only economic but strategic; it's also a question of geopolitics, diplomacy, and global systems.

Udayveer Singh is a student concentrating on international relations, especially the geopolitical dynamics of South Asia.