How the Hormuz Blockade Hit Asia

The closure of the Strait of Hormuz, which began in late February and lasted through June before a partial reopening following the June 17 U.S.–Iran memorandum of understanding, precipitated a series of cascading, mutually reinforcing knock-on effects. The Strait of Hormuz transits 20 million barrels of oil a day when open, a quarter of the total global maritime oil trade, 80% of which is bound for Asia. Iran mined the strait and intermittently opened fire on vessels seeking to transit through the strait. The United States variously blockaded and then sought to unblock the strait amid talks with Iran. 

If the Hormuz crisis shows anything, it is that energy security and diversification of petrochemical feedstocks have become fundamental components of sovereignty in an increasingly multipolar world. The varying impacts of the chokepoint effect are best understood by examining three key Asian economies: China, the region’s political and economic hegemon; Japan, a linchpin of American regional influence; and Vietnam, a vital link in global supply chains and a major supplier of plastics to the United States, Europe, and Japan—an industry heavily dependent upon Gulf-originating naphtha. 

China 

China has wrapped its economy in a massive insulation blanket with 1.4 billion barrels of crude oil in state and commercial inventories as of the end of 2025, according to the U.S. Energy Information Administration. This is more than the comparable total held by the United States, Japan, all European states in the Organisation for Economic Co-operation and Development, Saudi Arabia, South Korea, Iran, the United Arab Emirates, and India combined. 

Shipping Lanes and Land Lines 

China’s strategic oil reserve is estimated to cover more than half a year of domestic demand. But a stockpile is never a long-term solution: as the world’s largest manufacturing economy and exporter, China still depends heavily on imported energy. In 2025, China sourced 42% of its declared crude oil imports from Gulf states. Iranian imports are no longer declared by Chinese customs, but analysts suggest that Iran supplied about 13.5% of Chinese maritime crude imports in 2025, pushing China’s overall reliance on Gulf crude to more than half of its total imports—leading the country to take immediate steps to further insulate its economy and providing a window into China’s state-owned corporate crisis response. 

ImportGenius data shows PetroChina, the country’s largest oil and gas producer, sourcing more than 1.7 million barrels of crude through its Kazakhstan-China oil pipeline in March 2026, largely from fields in the Central Asian republic’s Karaganda and Kyzylorda regions. This is one of the largest monthly volumes visible on ImportGenius real-time records since January 2024 and represents a 142% year-on-year increase. Not only are these imports up, but the declared prices show that many of these imports occurred at nearly USD 100 a barrel, meaning PetroChina was ready to pay market rates during a crisis despite its enormous buffer. 

Electric Vehicles 

At this point, 12% of cars currently on the road in China are new energy vehicles (NEVs), a number that will surely rise rapidly: nearly half of newly registered vehicles in China are NEVs. NEVs and China’s electrification remain insufficient at this stage of development to decouple the country from crude-derived fuels, but nevertheless, the Chinese automotive industry is benefiting from significant increased international interest in vehicles not beholden to the pump. Autotrader reported in April that demand for NEVs rose 28% month-on-month. The European Automobile Manufacturers’ Association reported a 50% year-on-year rise in new battery-EV registrations in the European Union in March. And EV dealers in the Philippines and Vietnam are reporting record demand. 

Coal-Based Chemicals 

Beyond transportation, crude oil, used to produce naphtha, is a key input to China’s chemical industry. But China has also invested heavily in an industry seen nowhere else: coal-to-chemicals or coal-based chemical production, processes that can produce propylene and ethylene without naphtha cracking. It can even be used for the production of jet fuel and diesel through indirect liquefaction. China is both the world’s largest coal producer and importer, producing over half the global total and supplementing this with imports primarily from Russia and Australia—a supply chain free of Gulf dependency. 

Chinese propylene production now accounts for 42% of the global supply, up from 8% in 2020. Recent trade data from China and Japan indicates that Japanese manufacturers are sourcing key petrochemicals from China to manage their own struggles with the disruption to naphtha import supplies. Japanese imports of Chinese propylene, ethylene, and butadiene, all derived from naphtha, are up significantly year-on-year. 

Renewables 

A final note on China’s ability to withstand, and even benefit from, the Hormuz closure: as countries scrambled to insulate their economies from chokepoint weaponization, China has found itself uniquely positioned by near-total vertical integration to provide them with solar panels, batteries, and electric vehicles. 

Japan 

As an island nation with limited domestic energy resources, Japan has an enormous reliance on maritime imports of crude, coal, and natural gas. Japan’s significant strategic oil reserve gives it a buffer equivalent, in time if not in volume, to China’s. Unlike China, however, Japanese industry has little room to maneuver. Historical data from Japanese customs indicates that Japan relied on Middle Eastern countries for 95% of its crude imports, and 70% of that volume transited the Strait of Hormuz. 

Japanese domestic production of crude oil only accounts for 0.3% of the global total, data from the International Energy Agency shows. The Hormuz closure further aligned Japan’s geoeconomic dependency on the United States, which is betting heavily on cementing its dominant role in mineral-based fuel production, and whose crude shipments have already begun arriving in Japan. 

Japan’s power grid, on the other hand, is insulated from direct shock. Coal and natural gas each account for roughly 32% of Japan’s electrical production, with nuclear and solar each providing another 10%. Japan has only a 7% reliance on Hormuz-impacted natural gas. 

Against this backdrop, Japan is taking steps to fortify weaknesses in other parts of its supply chain, notably plastics imports from Vietnam. Japanese data indicates that Vietnam provides Japan with roughly 9% of its plastic product imports (HS 39) and 4% of auto parts imports (HS 8708). ImportGenius’s data inventory originating from Vietnamese customs identifies Hyosung Japan, the Japanese trading company Hanwa, and Coca-Cola Bottlers Japan as major importers of Vietnamese plastics. As Vietnam began struggling to source crude oil, a key input for plastics production, Japanese oil refiner Idemitsu Kosan committed to supplying 4 million barrels of oil to Vietnam. Japan has also committed USD 10 billion in loans to Southeast Asian partners for crude oil purchases, including Vietnam, through POWERR Asia, a new Japanese energy security initiative. 

The big hit from Hormuz is to Japan’s own plastics and petrochemical industry. Some 40% of Japan’s domestic naphtha supply was sourced from the Middle East prior to the closure of the Strait. Naphtha is the primary feedstock for ethylene plants, and several, including plants operated by Mitsui Chemicals, Mitsubishi Chemical Group, and Idemitsu Kosan, have announced production cuts due to supply issues. Japan has reportedly secured naphtha supplies through the end of the year, but the shortage has doubled naphtha spot prices. 

These prices will filter downstream, threatening the margins and economic viability of a dizzying variety of Japanese makers of intermediate and finished products. The Japanese automotive industry, in particular, is doubly jeopardized. In addition to their reliance on plastic inputs, Japanese domestic automakers rely on Middle East facilities for 70% of their aluminum, and 27% of aluminum imports in 2025 were shipped through the Gulf. Aluminum is also critical to the shipbuilding, construction, packaging, and electrical-electronics industries, leaving Japanese conglomerates such as Sumitomo heavily exposed. These factors sum up a bleak picture for near-term Japanese economic growth until the shock recedes. 

Vietnam 

Vietnam’s situation in a Hormuz Strait disruption is precarious. Unlike China and Japan, it does not have significant strategic crude stockpiles and lacks the political and economic muscle to aggressively compete for energy supplies. More than any other Asian economy, Vietnam demonstrates the interdependent nature of modern global supply chains and the consequences of the Hormuz closure. Given the country’s rising importance as a “connector” economy in global supply chains, what happens in Vietnam threatens disruptions elsewhere—including in the United States, China, and Japan. 

ImportGenius’s data shows that, in 2025, Vietnam imported nearly 80% of its crude oil from Kuwait via the Strait of Hormuz. All of this crude, approximately USD 6 billion worth, was supplied by Kuwait Petroleum Corporation (KPC). As it happens, KPC also holds a 35.1% stake in Vietnam’s Nghi Son Refinery and Petrochemical LLC, which supplies between 35% and 40% of Vietnam’s domestic oil demand. 

KPC declared force majeure on March 7, citing an inability to export production due to the closure of the Strait. In early April, KPC’s headquarters and, more critically, its Mina Al Ahmadi facility and Mina Abdullah refinery were struck by Iranian drones. KPC extended its earlier force majeure declaration in a late April announcement. Damage to infrastructure cut Kuwait’s crude output to early 1990s levels in April 2026, which represented a loss of approximately half of the nation’s 2025 production. 

At the time, KPC estimated that several months of repairs would be required to regain lost production. As with Japan’s aluminum, this is a situation where the reopening of the Strait does not mean an immediate restart of production. And since Nghi Son Refinery is designed to process Kuwaiti crude, alternate blends cannot be optimally refined without expensive and time-consuming modifications to the refinery. 

Vietnam has some buffer against the shock, having lowered its electrical grid’s reliance on natural gas to 6.4% of its domestic generation capacity, with coal now accounting for 50%. Vietnam can meet around 40% of its current coal demand through domestic production. 

Nevertheless, the Vietnamese government took swift action to stabilize fuel prices and limit domestic energy consumption, including the disbursement of USD 217 million from its Petroleum Price Stabilization Fund and the suspension of fuel taxes through June. Gasoline prices were 26% above pre-closure levels in May. Diesel prices went up 51% in May, down from 145% above pre-closure levels in early April. 

Disruption to the Vietnamese plastics and petrochemical industries threatens to cascade through to Vietnam's trading partners. A severe naphtha- and ethylene-derived intermediates shortage will impede Vietnam’s ability to produce and export plastic products required for the global manufacturing complex. Saudi Basic Industries Corp, which supplied Vietnam with USD 45 million of ethylene-derived intermediates in 2025, declared force majeure on a number of product categories in March and shortly afterwards faced military strikes on its facilities at Jubail. 

This potential shock is likely to reverberate through supply chains to the United States, in particular. Aggregated Vietnamese trade data and U.S. Census Bureau data confirm that the United States is the largest recipient of Vietnamese plastics at over USD 4 billion in 2025. Japan and China are the next largest markets, with Japan sourcing USD 1 billion and China sourcing USD 504 million in 2025. All told, disruptions to Vietnam’s plastics industry could represent a USD 9.4 billion shock to global plastic goods output. 

Vietnam’s precarity is ultimately a source of global precarity. International dependence on Vietnam for plastics and petrochemical products, two industries dependent on resources made scarce by the closure of the Strait of Hormuz, made Vietnam a critical industrial chokepoint for trade flows. Vietnam’s outsized dependence on Kuwait and its lack of a strategic oil stockpile compounded that fragility. 

Conclusion 

The closure of the Strait, combined with attacks on Gulf oil and refinery infrastructure, removed access to resources upon which global economic activity is immutably predicated, especially power and plastic. But the response to the Hormuz closure also allows us to draw more nuanced lessons about the ultimate impact of chokepoint closures. 

1. Stockpiles work. Petroleum reserves have always served a dual purpose: as an insurance policy against shocks in supply, and as a buffer against price increases. Historically, such shocks have resulted from supply management practices among oil-producing countries rather than from warfare, which is significantly more volatile. 

The Hormuz closure resulted in a great deal of market volatility, with crude oil prices rising and falling dramatically throughout the period from late February to June. Yet the ability to draw upon strategic national stockpiles of crude, combined with demand destruction, has succeeded in attenuating supply shortages. 

2. Commodities are flexible, but downstream inputs are not. This lesson is a corollary of the first. Refined fuels might cost as much as 50% more due to chokepoint constriction, but the deployment of strategic feedstock reserves, combined with a diversification of sources (countries and production processes, like coal-to-chemicals), can maintain market access to the resource. 

Even so, the downstream products derived from that commodity are less flexible. Refineries and other processing facilities are often designed for a specific commodity from a specific region, with a specific chemical composition. The availability of specific petrochemicals, resins, or other manufacturing inputs is not always assured and has the potential to disrupt global supply chains. A manufactured product can require thousands of inputs, and a shortage of a single one can have an outsized impact. 

William George is Director of Research, ImportGenius, and Lynn Hughes is Lead Analyst (Research), ImportGenius.

The views expressed in this article are those of the author(s) and do not necessarily reflect those of IISD. This article is adapted from a paper first published by the authors with the Hinrich Foundation.