The Asymmetric Shock: Who Really Pays When the Middle East Burns?

In November 1973, Japanese consumers, gripped by fear of shortages, stormed grocery stores to panic-buy toilet paper: a scene so absurd it became emblematic of a crisis no one had seen coming. OAPEC’s embargo, triggered by the Yom Kippur War, had quadrupled the price of oil in under three months. Petrol queues stretched around city blocks from Manchester to Boston. Governments imposed Sunday driving bans. The industrialised world, it turned out, had built its prosperity on a resource it did not control.

 

The response, eventually, was serious. Strategic reserves were built. New international institutions were created. Japan restructured its entire industrial base. The lesson, it seemed, had been learned.

 

Fifty years on, crude oil has surged past $100 a barrel, Strait of Hormuz shipping has been severely disrupted, and the language of energy crisis is back in circulation. The warning is familiar; the countries now receiving it are not the same ones who built the institutions, wrote the policy responses, or drew the lessons the first time around. The countries now paying the price are not the ones who set it.

 

The Weapon and Its Target

The 1973 oil shock was not an accident of markets. It was a deliberate act of geopolitical leverage. When OAPEC, the Organization of Arab Petroleum Exporting Countries, announced its embargo against countries that had supported Israel in the Yom Kippur War (the United States, the United Kingdom, the Netherlands, and others) it was using energy supply as a weapon with named targets. Oil was now a foreign policy tool, not just a commodity. 

 

Even within the targeted group, the pain was asymmetric. Japan, which had little political stake in the Arab-Israeli conflict, experienced its first post-war economic contraction the following year. Western Europe, which had been importing between 45 and 50 per cent of its oil from OPEC states, faced severe fuel shortages and industrial disruption. The fourfold price increase shook the foundations of economies that had until then enjoyed plentiful, cheap oil, having done little to question where it came from or how precarious the arrangement was.

 

What followed was, by any measure, a serious institutional response. In 1974, the International Energy Agency was established by OECD countries, giving wealthy importing nations a coordinating body for the first time. Strategic petroleum reserve programmes were launched across the industrialised world. The United States created the Department of Energy in 1977 partly to maintain and manage its Strategic Petroleum Reserve, a buffer designed to absorb the kind of supply shock that 1973 had delivered without warning. Japan began a decades-long transformation of its industrial base, deliberately steering away from steel, heavy chemicals, and energy-intensive manufacturing toward electronics, precision engineering, and automobiles: industries that generate far more economic output per unit of energy consumed.

 

Six years later, however, the Iranian Revolution triggered a second shock. Oil prices doubled again within twelve months. This time, the actual reduction in global supply was only around four per cent; markets responded with the same panic. The lesson of 1973, it turned out, had been partially absorbed, not digested. The United States, in particular, had preferred to regard the first crisis as a geopolitical kink that could be managed in the future rather than a structural warning. 

 

The reforms that followed both shocks were real and consequential. But they were designed by and for the wealthy importers of the 1970s. The world those institutions anticipated was not the world that arrived.

 

Fifty Years Later

The single most consequential shift in global energy geopolitics since 1973 has not been a war, an embargo, or a price shock. It has been the American shale revolution. Over the past two decades, fracking transformed the United States from the world’s largest oil importer into its largest producer. American exposure to Gulf supply disruptions has declined dramatically at the domestic level.

 

But oil is a global commodity; when a chokepoint like the Strait of Hormuz is effectively closed, the price shock transmits instantly to every market regardless of where a country sources its supply. US gasoline prices have risen sharply since the conflict began, but the American consumer is still less exposed than the primary importers. The more consequential change is political rather than economic. When a disruption in the Gulf now moves the price at the American pump by cents rather than dollars, the domestic incentive structure for restraint in the Middle East changes. The countries now bearing the sharpest costs are not the ones whose foreign policy helped produce the crisis.

 

Asia, on the other hand, faces a different picture. The region's export-driven industrialisation, the transformation that lifted hundreds of millions out of poverty, was supported by imported fossil energy. As Asian economies grew, so did their appetite for Gulf oil and gas. The Middle East, in turn, directed an ever-larger share of its exports eastward. The result is a striking irony: Japan, which restructured its industries and built a reserve system in direct response to the 1973 crisis, now imports a higher share of its crude from the Middle East than it did before. The diversification of industrial structure did not translate into diversification of energy supply.

 

There is a harder version of this argument. The West did not simply allow its energy dependency to persist; in important ways, it outsourced it. Globalised supply chains moved energy-intensive manufacturing to Asia, where cheap imported fuel made large-scale production and industry viable. The geopolitical exposure, the supply-chain vulnerability, and the carbon cost were all transferred, quietly and profitably, to the other side of the world. Asian industrialisation absorbed the risk while Europe de-industrialised.

 

Who Pays Now

The numbers make the current exposure unambiguous. In 2025, almost 90 per cent of all volumes exported through the Strait of Hormuz were destined for Asian markets. Japan relies on the Middle East for roughly 90 per cent of its crude oil imports, almost all of it routed through the Strait. South Korea draws around 70 per cent of its crude from the region, with over 95 per cent of that passing through Hormuz. Qatar alone supplied 29 per cent of China’s LNG in 2025.

 

Within Asia, that exposure is itself sharply unequal; the difference between a wealthy importer and a poor one is the difference between a painful shock and an existential crisis. Japan has authorised its largest-ever strategic reserve release, deploying infrastructure built precisely because of 1973. South Korea has imposed fuel price caps for the first time in thirty years. Both countries have the fiscal room and institutional capacity to absorb the shock, at least to a point. The same cannot be said for the fuel-importing nations of South and Southeast Asia. Qatar and the United Arab Emirates account for 99 per cent of Pakistan’s LNG imports and 72 per cent of Bangladesh’s. Natural gas powers half of Bangladesh’s electricity generation and a quarter of Pakistan’s. Vietnam has roughly twenty days of reserves remaining. Bangladesh has deployed military units to guard fuel depots; Pakistan has imposed a four-day working week. For these countries, a sustained disruption doesn’t mean higher household bills. If the crisis drags out long enough, it means power cuts, fertilizer shortages, and industrial shutdowns.

 

The political stakes are correspondingly severe. History offers a precise template for what comes next. In May 1998, under pressure from the International Monetary Fund during the Asian financial crisis, Indonesia’s government raised the price of kerosene by 25%, diesel by 60%, and gasoline by 71% in a single move. The resulting protests, combined with the shooting of four students at a university, triggered the riots that ended Suharto’s thirty-two-year rule within the week. Energy shocks do not stay economic for long in states where large portions of the population spend a significant share of their income on fuel. The countries most exposed today have the thinnest fiscal cushions and the most fragile political equilibria; Indonesia’s current government governs with the memory of 1998 shaping every calculation it makes about subsidy reform.

 

Worth stating plainly: these countries had no hand in creating the dependency they are now trapped inside. They played no role in the political conflicts that destabilised the Gulf; they did not design the global energy system; and they do not have the institutional weight to shape the international response. They are, in the most direct sense, paying for a crisis they did not cause.

 

The Warning, Unheard Again

Not every country is suffering equally, and the variation is instructive. Norway sells into a market whose prices are now surging in its favour; its sovereign wealth fund, established to invest North Sea oil revenues, holds over $1.9 trillion. The crisis that is devastating Bangladesh is, in fiscal terms, a windfall for Oslo. France generates roughly 70 per cent of its electricity from nuclear power; Spain close to 60 per cent from renewables, with nuclear providing a further 20 per cent. Both countries have registered among the lowest energy prices in the European Union since the crisis began. The contrast with Germany is pointed: having shut its last nuclear reactors in April 2023, it now meets nearly 70 per cent of its energy needs through imports and faces among the steepest pressures in Europe. The lesson is not subtle. Countries that built structural independence from imported fossil fuels are weathering this crisis measurably better than those that did not; and the countries that chose dependency over resilience made that choice freely, with full knowledge of what 1973 had demonstrated.

 

There is, however, a harder question sitting beneath all of this. The Strait of Hormuz is closed because the United States and Israel launched military strikes on Iran in late February 2026. The instability now convulsing global energy markets is not a natural disaster; it is the consequence of a political decision. The 2003 invasion of Iraq, undertaken on the basis of intelligence that proved false, destabilised the region for a generation and helped create the conditions in which the current conflict became possible. The countries now paying the highest price for that history are not the ones who made it. They were not consulted, they raised no armies, and they had no vote. The asymmetry running through this crisis is moral as well as economic. Fifty years ago, the world learned that energy is political. What it has learned since, but couldn’t address, is that the politics of energy has consequences that do not confine themselves to the countries doing the deciding.

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References:

1. World Economic Forum — "The Global Price Tag of War in the Middle East" Brent crude surging to $120; Japan 90% Middle East crude dependency; South Korea 70% routing 95%+ through Hormuz; US relatively insulated. https://www.weforum.org/stories/2026/03/the-global-price-tag-of-war-in-the-middle-east/

2. Council on Foreign Relations — "The Iran War is Causing Energy Chaos in Asia" Consumer panic across South and Southeast Asia; Indonesia 1998 uprising context; 84%/83% oil and LNG flows to Asia. https://www.cfr.org/articles/the-iran-war-is-causing-energy-chaos-in-asia

3. https://history.state.gov/milestones/1969-1976/oil-embargo

4. Wikipedia — "1970s Energy Crisis" Comparison of 1973 and 1979 shocks; Western dependency context. https://en.wikipedia.org/wiki/1970s_energy_crisis

5. Dawn.com / Reuters — "Why is Asia So Reliant on Middle Eastern Oil?" Japan 95%, South Korea 70% Middle East crude dependency; Asia sourcing 60% of crude from Middle East; 14.74 million bpd imported in 2025. https://www.dawn.com/news/1980077

6. Baird Maritime — "The Reasons Behind Asia's Reliance on Middle East Oil Supplies" Same Reuters data; Singapore dependence rising to 70%+; China sourcing ~50% of seaborne imports from Middle East. https://www.bairdmaritime.com/shipping/tankers/the-reasons-behind-asias-reliance-on-middle-east-oil-supplies

7. Rinnovabili.net — "Strategic Petroleum Reserves: IEA's Emergency Response to Crisis" The 400 million barrel 2026 release; IEA coordinated action details; Fatih Birol quote. https://www.rinnovabili.net/business/strategic-petroleum-reserves-global-energy-stability/

8. World Economic Forum — "Why was the IEA Set Up?" Plain-language explanation of IEA creation and mandate. https://www.weforum.org/stories/2022/03/iea-1970s-energy-crisis/

9. US Energy Information Administration — "Strait of Hormuz Remains Critical Oil Chokepoint" 84% crude, 83% LNG to Asian markets in 2024; 20 million bpd through strait; US receives only 2% of petroleum liquids from Hormuz. https://www.eia.gov/todayinenergy/detail.php?id=65504

10. IEA — "Strait of Hormuz" (Official Page) 90% of Hormuz volumes to Asia in 2025; 7% of Europe's LNG; Qatar and UAE LNG with no alternative routes; spare capacity implications. https://www.iea.org/about/oil-security-and-emergency-response/strait-of-hormuz

11. IG International — "Strait of Hormuz Closure: Oil Prices and Stagflation Risk" Japan 95% Middle East crude; South Korea 70%; Nikkei and KOSPI market impacts; stagflation risk; IMF macroeconomic estimates. https://www.ig.com/en/news-and-trade-ideas/strait-of-hormuz-closure-implications-for-asia-260312

12. Atlantic Council — "What a Middle East Oil and LNG Crisis Means for China and East Asia" 78% of East Asian crude through Hormuz in 2025; Japan 150 days reserve cover; South Korea 33 days; Taiwan 167 days domestic supply. https://www.atlanticcouncil.org/dispatches/what-a-middle-east-oil-and-lng-crisis-means-for-china-and-east-asia/

13. Zero Carbon Analytics — "Asian Countries Most at Risk" Japan/South Korea more structurally vulnerable than China/India; fossil fuel import share data; Japan nuclear shutdown post-Fukushima effect on grid dependency. https://zerocarbon-analytics.org/insights/briefings/asian-countries-most-at-risk-from-oil-and-gas-supply-disruptions-in-strait-of-hormuz/

14. Kpler — "Middle East Conflict: Gas Market Implications" Pakistan 99% LNG from Qatar; Bangladesh/Pakistan 1–2 weeks domestic storage cover; South Asian demand destruction modelling; Italy long-term Qatar contract details. https://www.kpler.com/blog/middle-east-conflict---gas-market-implications-a-continuing-assessment

15. Christian Science Monitor — "Asian Countries Call for Belt-Tightening" Country-level impacts; Indian restaurateurs, Filipino jeepney drivers; net oil-importing nations hardest hit. https://www.csmonitor.com/World/Asia-Pacific/2026/0313/Asia-Iran-war-gas-shortages

16. Euronews — "Which EU Countries Are Most Exposed to the LNG Supply Disruption?" Italy 30% LNG from Qatar; Belgium 8%; Poland 17%; Belgium storage at 25.5%; EU average 30%; competition for spot cargoes. https://www.euronews.com/business/2026/03/06/which-eu-countries-are-most-exposed-to-the-lng-supply-disruption

17. IEEFA — "Strait of Hormuz Disruption Would Jeopardise 10% of Europe's LNG Imports" Italy 45% LNG from Qatar (2024); Belgium and Poland 38%; Europe-Asia cargo bidding dynamics; 2022 precedent. https://ieefa.org/resources/strait-hormuz-disruption-would-jeopardise-10-europes-lng-imports

18. OSW Centre for Eastern Studies — "Suspension of LNG Exports from Qatar" Italy 32%, Poland 25%, Belgium 17% Qatar LNG share; EU storage depleted; Bangladesh and Pakistan two-thirds LNG through Hormuz; Pakistan essentially 100% from Qatar. https://www.osw.waw.pl/en/publikacje/analyses/2026-03-03/suspension-lng-exports-qatar-spectre-another-gas-crisis

19. GMK Center — "European Gas Prices Continue to Rise" European storage at 28.93% (March 17, 2026); TTF futures data; HSBC forecast 40% higher gas prices through 2027; EU Commission price cap proposal. https://gmk.center/en/news/european-gas-prices-continue-to-rise-due-to-the-conflict-in-the-middle-east/

20. https://www.foronuclear.org/en/updates/news/germanys-chancellor-merz-says-the-nuclear-phaseout-was-a-huge-mistake/ Neutron Bytes / Energy Central — "Nuclear Shutdown Called a Mistake by German Chancellor" Germany 70% energy from imports in 2025; Merz speech to German Chamber of Commerce; SMR proposal.