The energy shock from the war in the Middle East is accelerating efforts to strengthen regional electricity supply in South East Asia. The region has received significant foreign investment in advanced manufacturing and data centres in the past few years, sectors which use substantial amounts of electricity.
The vulnerabilities exposed by the crisis have been a catalyst for the Association of South Asian Nations (ASEAN) Power Grid Initiative, which was initially launched in 1997 but had been developing at a slow pace since. The project aims to achieve regionally integrated grid operations by 2045.
Go deeper with GlobalData
Discover B2B Marketing That Performs
Combine business intelligence and editorial excellence to reach engaged professionals across 36 leading media platforms.
In April 2026, the Asia Development Bank (ADB) launched the Regional Connectivity Fund for Energy to help finance the project. Initial funding amounts to $25bn, with contributions from Australia, Canada, the EU, Germany and the UK. The ADB also separately announced plans to mobilise $6bn by 2030 to deepen South East Asia’s capital markets.
“There are already major groups coming in and asking, how is that capital going to be deployed? What are the primary sites? What are going to be the initial networks? That has all started to develop at a pace which wasn’t there six months ago,” Andrew Keable, co-founder and managing director at KW Group, an FDI advisory in the region for over a decade, says. “[The war] totally flipped the switch and put it into accelerate.”
Effects of the Strait of Hormuz closure
The effects of the conflict were felt quickly in the ASEAN region. More than 80% of the oil and gas that passes through the Strait of Hormuz is destined for Asia. ASEAN members, and China, South Korea and Japan, receive more than a third of the total energy imports from the Middle East.
According to S&P’s manufacturing purchasing managers’ index (PMI), which indicates the health of the manufacturing sector, there was a notable decline in demand indicators in March, as well as rising costs that led to the “sector’s weakest performance in six months”.
In a note, S&P Global Market Intelligence economist Maryam Baluch said the most visible impact of the war in the Middle East in ASEAN countries was a significant rise in price pressures.
“Four of the seven tracked ASEAN economies recorded a slowdown across the manufacturing sector, including Indonesia, which was only just inside growth territory,” Baluch said. “As a result, overall growth slipped to a six-month low, a shift from February’s record improvement.”
Governments in the region have been quick to implement emergency measures to safeguard oil supplies and protect consumers from rising prices. In the Philippines, the government has imposed a four-day working week for government offices, in Thailand and Vietnam officials have been encouraged to work from home where possible, and programmes like price caps and subsidies have been introduced.
ASEAN’s energy problem
Even before the closure of the Strait of Hormuz, the region’s energy supply had been under pressure, as data centre investments began to explode demand. According to Wood Mackenzie, power demand for the sector is set to quadruple from 2.6GW to 10.7GW in the region between 2025 and 2035.
Malaysia has the biggest data centre project pipeline in the region, accounting for 60% of ASEAN’s proposed data centre projects. This rapid growth has raised concerns that the transition to renewable energy sources may be postponed.
Timothy Wong, a senior analyst at BowerGroupAsia, previously told Investment Monitor, that, as things stood, demand for power was far outstripping supply. “There are concerns of an energy crisis looming in the next couple of years if nothing is done,” Wong said at the time.
Efforts to increase regional interconnectivity have so far mostly been through bilateral or trilateral agreements. For example, since 2022, the Laos-Thailand-Malaysia-Singapore Power Integration Project has enabled up to 100MW of electricity in Laos to supply power to Singapore via existing transmission links in Thailand and Malaysia.
In October 2025, the World Bank and the ADB also launched the ASEAN Power Grid Financing Initiative, providing financing, technical assistance, feasibility studies, regulatory analysis and institutional capacity building. It is estimated the project will require up to $800bn in investment by 2045.
“The ASEAN Grid is going to help in terms of de-risking a lot of the investment decisions that are going to be made,” Keable noted.
