The February 28, 2026 attacks on Iran by the United States and Israel were carried out due to pressure from Israeli Prime Minister Benjamin Netanyahu, who persuaded Washington to use force to cripple Iran's nuclear program, which Israel viewed as an existential threat. However, no thought was given to how the war would end or its broader effects on the region and beyond.
Global and Regional Impact
The war affected not only the Middle East but also most of South and East Asia, particularly the eastern part of the continent. Poor people in poor countries were deeply affected, as reported by several Western newspapers. China, the largest Asian economy, was affected both negatively and positively, emerging largely as a winner.
The shocks to the global energy system from the war and the closure of the Strait of Hormuz sent some countries into a tailspin with higher prices for energy, fertilizer, and chemicals. China, however, largely escaped these effects due to its large oil and gas reserves and better political and economic management.
China's Advantage
A report published by the Asia Group on June 30 reinforced China's position as a competitive manufacturing hub. The disruptions spurred by the war helped China advertise itself as a stable partner and a dependent source of clean energy technology like solar panels, batteries, and electric vehicles, which it dominates globally. "It is hard not to come to the conclusion that China is a winner here," said Kurt Campbell, chairman and co-founder of the Asia Group and former deputy secretary of state.
Pakistan has developed an impressive solar energy-based economy, as noted in a story by The Economist. Villages along the motorway from Lahore to Islamabad use solar energy to power homes and tubewells.
Dependence on Middle East Energy
Asia, the world's manufacturing hub, is greatly dependent on the Middle East for energy and industrial products. The continent sources 80% of its oil and 90% of its natural gas through the Strait of Hormuz. The conservative rulers of Iran, who took office after US and Israeli bombs killed most of the senior leadership, have maintained the predecessor regime's approach. One threatened action is to close the Strait of Hormuz.
The war has also impeded production and movement of products like naphtha (used for plastics and chemicals), helium (used in semiconductors and MRI machines), and sulfur (needed to refine copper, nickel, and critical minerals for electric vehicle batteries).
Supply Chain Disruptions
China managed to avoid major consequences by drawing on reserves and imposing export restrictions and quotas on its oil refineries, though its imports declined by 30% in May 2026. Supply chain disruptions pose significant problems for other Asian countries, according to the Asia Group report. The report used AI to model scenarios for how governments and companies would respond to various outcomes.
In India, rising prices for fertilizer, fuel, and food have stoked opposition to the Bharatiya Janata Party (BJP) led by Prime Minister Narendra Modi. Higher fertilizer costs, combined with a weak monsoon season, would burden over 40% of India's agricultural workforce, with serious political consequences.
In Southeast Asia, most countries are net energy importers and have turned to emergency borrowing and extended subsidies. Many are looking to China to provide solar panels, battery storage, and electric vehicles. India has worked with China to establish a facility manufacturing electric-powered rickshaws to reduce pollution.
Duration of the Crisis
Kurt Campbell noted that the impact on many countries and supply chains has been "deep and profound" and could worsen if the crisis continues. Japan, South Korea, and others have worked through reserves that buffered them from severe effects. "In many capacities, from jet fuels to a lot of diesel oils we are basically almost running empty," he said.
China has not only dealt with the crisis but has taken advantage of its effects on the Global South (formerly the developing world). The changes in the global system have placed Pakistan at the center of the geographic area that could become the central location for dealing with the crisis caused by the war in Iran.
