Ongoing geopolitical tensions in the Middle East are generating volatility across global energy markets. Our analysts are actively assessing the short- and long-term implications for energy security and commodity pricing in our region and will continue to share relevant insights.
This month, our team published research examining energy policies, market dynamics, and financial developments across Asia. Key findings include:
In the first two weeks of the Iran conflict, markets are starting to brace for longer-term upheaval. While fiscal, monetary, and fossil fuel supply measures may help energy importers temporarily withstand price shocks, they do not fundamentally resolve them. The most financially sustainable, long-term solution is to reduce exposure to global market volatility altogether by rapidly deploying renewable energy.
In February 2026, Indonesia and the United States (US) signed the Agreement on Reciprocal Trade (ART), which eliminated tariffs on 1,819 Indonesian products. However, without careful policy management, the ART could leave Indonesia more exposed than empowered. The government should act decisively by investing in renewables, strengthening domestic industries, and diversifying trade partners to ensure the promise of a “new golden age” remains a reality.
South Korea’s pledge to phase out 40 of 61 coal-fired power plants (CFPPs) by 2040 raises concerns that retired coal capacity may be replaced with LNG rather than renewables, undermining expected reductions in greenhouse gas (GHG) emissions. From 2017 to 2023, coal-fired power generation fell by 23% while gas-fired generation rose by 25%, contributing to total carbon dioxide (CO2) emissions increasing by 6% to 256 million tonnes in 2023.
Japan resold a record volume of LNG overseas in fiscal year (FY) 2024 rather than consuming it domestically. 40% of all LNG volumes handled by Japanese companies were sold outside Japan, up from just 16% in FY2018. Corporate strategies and government policies supporting overseas fossil fuel investments and LNG resales increasingly put companies at financial risk amid looming global oversupply.
Thailand’s natural gas-fired power plants are highly underutilized, yet the government still aims to bring 6.3 gigawatts (GW) of new gas-fired capacity online by 2037. Nearly all proposed projects face extensive delays, and in 2025, the Electricity Generating Authority of Thailand (EGAT) canceled three project tenders. Rising LNG import dependence and higher capital costs for new gas plants present challenges for the economics of gas expansion plans.
The European Union (EU) began imposing Carbon Border Adjustment Mechanism (CBAM) tariffs from 1 January 2026, taxing imports based on embedded carbon emissions. Similar measures elsewhere could increase production cost volatility, undermining South Korea’s export competitiveness, particularly in liquefied natural gas (LNG)-based semiconductor and fossil-fuel-powered Artificial Intelligence (AI) data center supply chains.
Japan’s growth in Battery Energy Storage Systems (BESS) reflects strong investor enthusiasm, but physical deployment remains minimal. BESS project applications have surged from 70GW to 170.8GW since mid-2024, yet only 0.62GW is connected. Grid connection bottlenecks and policy instability are the primary barriers to implementation. Speculative grid applications, firm charging-side requirements, slow interconnection reforms, and shifting auction volumes are constraining deployment and undermining revenue certainty.
We invite you to view the analyses in full for more detailed insights.
Warm regards,
Paige Nguyen
Director, Asia Institute for Energy Economics and Financial Analysis
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