Middle East conflict raises long-term energy security concerns in SE Asia power markets

By Romel S. Gurky

Southeast Asia’s power markets are expected to remain largely insulated from immediate price shocks caused by the ongoing Middle East conflict, but the situation is reinforcing energy security as a key priority for long-term planning, consultancy Wood Mackenzie said on Tuesday.

Regulated pricing structures and long-term liquefied natural gas (LNG) contracts are helping shield most countries in the region from near-term volatility, although rising gas prices are expected to feed into electricity costs through the second quarter of 2026.

“While Southeast Asia is relatively insulated from immediate price shocks, the current crisis is a clear reminder of the region’s structural exposure to global fuel markets,” said Yanqi Cao, senior analyst for Asia Pacific power and renewable research at Wood Mackenzie.

Short-term impacts are expected to vary across markets. Singapore and the Philippines are likely to see the earliest effects, with Singapore’s wholesale electricity prices rising by about 20% in the third week of March compared with pre-conflict levels. Prices in the Philippines have followed a similar trend.

In both markets, price caps are expected to limit the impact on end consumers.

Elsewhere, regulatory mechanisms are expected to delay or reduce the effect of higher fuel costs. Thailand’s fuel tariff adjustment is not expected until May, while power bills in Peninsular Malaysia are projected to rise by about 1%. Vietnam’s exposure remains limited, with gas accounting for around 9% of its power mix, and Indonesia’s subsidized tariff system is expected to shield consumers in the near term.

Read also: LNG reliance in SE Asia power sector faces rising risks, Rystad says

Despite rising fuel costs, the ability of Southeast Asian countries to switch away from gas and LNG remains constrained. Singapore and Thailand rely heavily on gas for power generation, accounting for about 85% and 65% of capacity respectively, limiting short-term alternatives.

Other markets, including Indonesia and Vietnam, may partially offset higher gas costs by increasing coal-fired generation or power imports, although capacity constraints remain.

Over the longer term, continued volatility in global energy markets is expected to influence policy and investment decisions across the region.

Several countries have outlined plans to develop nuclear power between 2030 and 2037, including the Philippines and Vietnam, while investment in renewable energy combined with battery storage is gaining momentum.

Policy initiatives include higher tariff caps for hybrid renewable projects in Vietnam, battery storage requirements in the Philippines, storage auctions in Malaysia and solar-plus-storage targets in Indonesia. Singapore is also advancing plans to import up to 6 gigawatts of low-carbon electricity by 2035.

Wood Mackenzie said sustained market disruption could accelerate these shifts, as governments seek to diversify energy sources and reduce exposure to global fuel price volatility.

Editing by Alexander Ginting