The closure of the Strait of Hormuz following the escalating conflict involving Iran has triggered one of Asia’s most severe energy shocks in recent years. As fuel prices surged and supply chains came under pressure, the crisis revealed a striking contrast in how Asia’s two largest powers responded to the needs of neighbouring countries.
While China moved to protect its own interests by restricting fuel exports and attaching political conditions to energy assistance, India continued supplying fuel to vulnerable neighbours, reinforcing its image as a reliable regional partner during a period of extraordinary uncertainty. The crisis has become more than a test of energy security. It has also become a test of leadership, exposing two very different approaches to regional influence.
China tightens supplies as Asian nations face shortages
The disruption of shipping through the Strait of Hormuz sent shockwaves across Asia. In 2024, nearly 84 percent of the oil and 83 percent of the liquefied natural gas transported through the strategic waterway was destined for Asian markets.
The sudden interruption pushed fuel prices sharply upward and created widespread anxiety across countries heavily dependent on imported energy. As governments and consumers scrambled to secure supplies, China responded by suspending new fuel export contracts and attempting to halt previously agreed shipments.
The move removed a major supplier from regional markets at a time when demand was rising rapidly and alternatives were limited.
The impact was immediate. The suspension affected fuel exports worth approximately $22 billion and left several countries struggling to secure replacement supplies. Among the hardest hit were Australia, Bangladesh and the Philippines, all of which had developed significant dependence on Chinese fuel exports.
China had supplied roughly one-third of Australia’s jet fuel requirements in 2024, while Bangladesh and the Philippines obtained nearly half of their fuel needs from Chinese sources. Once exports were restricted, prices escalated dramatically across the region.
Asian diesel derivatives surged to around $150 per barrel. Jet fuel climbed to approximately $163 per barrel, while gasoline prices reached $139.80 per barrel. These figures represented a sharp increase from pre-war levels that generally ranged between $79 and $92 per barrel.
Consumers across South and Southeast Asia responded by stockpiling fuel and reducing non-essential spending as governments struggled to manage the economic fallout.
Beijing uses energy as a political instrument
China’s actions were not driven by an inability to assist regional partners. The country entered the crisis from a position of relative strength. Beijing possesses extensive crude oil reserves and benefits from a large renewable energy sector, making it considerably more resilient to energy disruptions than many neighbouring countries.
Rather than sharing this advantage, however, China appeared to view the crisis as an opportunity to expand its geopolitical leverage. The clearest example emerged in China’s dealings with Taiwan.
Instead of offering energy supplies as humanitarian or economic assistance, Beijing linked fuel security directly to its long-standing political objective of reunification. Chinese authorities proposed stable energy access for Taiwan if the island accepted peaceful reunification with mainland China.
Chinese officials argued that Taiwan’s energy security would be better protected under what they described as a “strong motherland.” Taiwan rejected the proposal immediately.
Officials in Taipei characterised the offer as part of a broader pressure campaign rather than a genuine solution to the energy crisis. The episode underscored how Beijing views energy not merely as an economic commodity but as a strategic tool capable of extracting political concessions.
The Taiwan case also highlighted a broader contradiction in China’s regional strategy. While attempting to use energy as leverage abroad, Beijing’s own export restrictions demonstrated the limitations of such an approach.
Rather than creating goodwill, the policy intensified concerns among neighbouring countries about becoming dependent on Chinese energy supplies. At a time when the United States is seeking to counter Chinese influence across the Indo-Pacific, Beijing’s decision suggested that strategic advantage took precedence over regional stability.
India keeps fuel flowing across South Asia
India adopted a markedly different approach. Instead of restricting supplies, New Delhi expanded support to neighbouring countries facing fuel shortages. The response was consistent with India’s long-standing “Neighbourhood First” policy, but the crisis provided a real-world test of whether that commitment would hold under pressure.
The answer came quickly.
India supplied approximately 38,000 metric tonnes of fuel to Sri Lanka, covering a substantial portion of the island nation’s immediate requirements.
At the same time, fuel deliveries to Nepal and Bhutan continued without disruption despite mounting regional uncertainty. Both countries remain heavily dependent on India for energy supplies, making uninterrupted deliveries particularly important during the crisis.
Bangladesh also received additional diesel shipments, while New Delhi assured Dhaka that further supplies would continue through established cross-border pipeline infrastructure.
These actions were not emergency measures designed for publicity.
Rather, they reflected an established pattern of regional cooperation built over many years through institutional agreements and energy partnerships. Unlike China’s approach toward Taiwan, India’s assistance came without demands related to sovereignty, political alignment or strategic concessions.
The difference was especially visible in Nepal. Facing severe shortages, Kathmandu introduced extended government holidays as a means of conserving electricity and managing energy consumption.
Yet despite the pressure on regional fuel markets, India assured Nepal in March that regular fuel supplies would continue for at least three months. No negotiations were required. No political conditions were attached. The commitment was provided through an existing partnership framework that recognised Nepal’s immediate needs. The episode reinforced India’s reputation as a dependable supplier during periods of instability.
Building a regional energy network, not dependence
India’s ability to assist neighbours during the crisis was not accidental. It reflects years of investment in refining capacity, supply diversification and regional connectivity.
As the world’s fourth-largest refiner, India possesses significant flexibility in sourcing and processing crude oil. This capability has enabled the country to reduce vulnerability to supply disruptions while simultaneously maintaining exports to partners abroad.
India’s broader energy position differs substantially from that of several South Asian countries, including Pakistan, Bangladesh and Sri Lanka, which remain heavily dependent on Gulf energy supplies and therefore face greater exposure to disruptions in the West Asia. Operating at high utilisation levels, India’s refining sector now supplies energy products to more than 150 countries worldwide.
At the regional level, New Delhi has also focused on creating long-term energy interdependence based on mutual benefit rather than political pressure. A major milestone was achieved on 15 June 2025 when Nepal began exporting 40 megawatts of electricity to Bangladesh using India’s transmission network.
The arrangement was made possible through a trilateral agreement signed in October 2024 and marked a historic breakthrough in South Asian cross-border electricity trade. Bangladesh already sources around 15 percent of its electricity requirements from India through an existing interconnected grid system.
Meanwhile, discussions on linking Sri Lanka’s electricity grid with India’s network have reached an advanced stage. These projects point to a broader strategic vision. Rather than creating dependency, India is helping establish a shared regional energy architecture that allows neighbouring countries to trade power and improve energy security collectively.
The contrast with China’s conduct during the Hormuz crisis is difficult to ignore.
When Beijing offered fuel to Taiwan, the proposal carried a political condition attached to it. When India delivered fuel to Sri Lanka, Nepal, Bhutan and Bangladesh, the assistance flowed through established agreements without demands concerning sovereignty or geopolitical alignment.
The distinction becomes even more significant when considering the future of energy. China dominates many sectors associated with the green energy transition, including solar technology, batteries and components critical to emerging energy systems.
As countries gradually move away from fossil fuels, concerns are growing that Beijing could seek to exercise similar forms of influence through control over next-generation energy technologies.
The Hormuz crisis therefore offers an early glimpse into competing models of regional power.
According to World Bank projections released in January 2026, India’s economy is expected to grow by 7.2 per cent during FY2025-26, helping sustain South Asia’s overall growth momentum. Despite managing its own economic and energy challenges, New Delhi maintained supply commitments throughout the crisis.
That reliability may ultimately prove more valuable than any short-term geopolitical leverage. The lesson from this energy shock is straightforward. Regional leadership is measured not simply by economic strength, stockpile size or industrial capacity. It is judged by how a country behaves when neighbours face hardship and assistance is possible.
China, despite possessing the world’s largest onshore crude reserves, chose export restrictions and political bargaining. India chose continuity, cooperation and support. For many smaller Asian nations confronting fuel shortages and economic uncertainty, that difference is likely to be remembered long after the immediate crisis has passed.
