Iran’s closure of the Strait of Hormuz in late February did more than spike oil prices and strand 2,000 ships. It delivered a live demonstration — watched closely in Beijing, Taipei, Tokyo, and Washington — that relatively cheap weapons can shut down the world’s most critical waterway. If a mid-tier military power can choke off 25% of global seaborne oil with drones, mines, and shore-based missiles, what happens when the same logic is applied to the straits that carry 40% of all global trade through Asia?
Ship transits through Hormuz collapsed from around 130 per day in February to just six in March — a drop of roughly 95%. Maersk, MSC, CMA CGM, and Hapag-Lloyd all suspended transits. Brent crude peaked at around $126 per barrel in March in what has been described as the largest global energy shock since the 1970s. The economic fallout is still rippling outward: UNCTAD projects that global merchandise trade will decelerate from about 4.7% growth in 2025 to between 1.5% and 2.5% in 2026, with global growth expected to slow from 2.9% to 2.6%.
Asia’s Waterways Carry Higher Stakes
Hormuz is primarily an energy chokepoint. Asia’s straits carry energy, trade, and the semiconductor supply chain simultaneously — and the geography is even more constricting. The Strait of Malacca’s narrowest stretch, the Phillips Channel, is less than three kilometers wide — tighter than Hormuz’s narrowest navigable channel. Yet some 23.2 million oil barrels cross Malacca every day, more than what flows through Hormuz. It hosts over 40% of all global trade.
For China, the exposure is acute. Ninety percent of all Chinese trade, 80% of oil imports, and 62% of liquefied natural gas imports are seaborne, with most passing through this single chokepoint. In 2003, then-President Hu Jintao coined the term “Malacca dilemma” to describe precisely this vulnerability. The Iran war with the U.S. blockade of Hormuz has served to enlarge China’s Malacca dilemma by adding a parallel Hormuz dilemma — the Persian Gulf is the source of half of China’s imported oil and a third of its LNG.
The Taiwan Strait carries a different but equally devastating risk. Twenty percent of global maritime trade passes through it, and Taiwan produces over 90% of the world’s most advanced logic semiconductors. Bloomberg Economics estimates that a war triggered by a Chinese invasion could erase $10.6 trillion — equivalent to 9.6% of global output — in the first year alone. Even a blockade scenario would cause global economic output to decline by 2.8% in the first year, with China’s economy shrinking by an estimated 7% and Taiwan’s by nearly 40%.
The Archipelagic Squeeze
If primary chokepoints are disrupted, traffic must reroute through Indonesia’s secondary waterways — and both Washington and Beijing are already maneuvering for advantage there. In early April, Indonesian authorities recovered what is believed to be a Chinese underwater drone in the Lombok Strait, discovered by a local fisherman about ten miles north of Gili Trawangan. Chinese characters and the CSIC (China Shipbuilding Industry Corporation) logo were visible on the hull. The Lombok Strait offers a deep-water passage for submarines and supertankers linking the Java Sea with the Indian Ocean, and is considered a key alternative route if the Strait of Malacca were disrupted.
Washington has been pushing from the other direction. A leaked plan to grant the U.S. military sweeping overflight access to Indonesia’s airspace triggered a domestic backlash, with analysts warning that President Prabowo Subianto may be trading away Indonesia’s strategic independence. The proposal reportedly emerged following a February meeting between Prabowo and Trump. Indonesia’s foreign ministry sent an urgent, confidential letter to the defense ministry warning that granting blanket overflight rights risked entangling Jakarta in foreign conflicts. The fallout forced both sides to exclude the overflight clause from the final Major Defense Cooperation Partnership agreement.
Insurance as a Weapon
Hormuz revealed something more insidious than a physical blockade. In a conflict over Taiwan, China’s petroleum pathways could be shut without a naval blockade. For that, the United States would need just two things: to price China out of the insurance market and to warn the littoral states that facilitating Chinese oil imports carries its own, heavier cost. War-risk insurance premiums function as a de facto barrier to transit — when costs spike high enough, commercial shipping simply stops, regardless of whether a single shot has been fired. All that would be required to threaten Malacca’s viability is a persuasive case that a Taiwan conflict could spill into the South China Sea and from there into Asia’s main oil corridor.
Beijing’s countermeasures face persistent limitations. China has built a strategic stockpile of nearly 1.4 billion barrels of oil and constructed overland alternatives with a combined capacity of roughly 1.5 million barrels per day, though that still pales in comparison to the 7.9 million barrels flowing through the strait to China daily. Overland corridors through Pakistan and Myanmar remain constrained by political instability, security risks, and limited capacity — they function as supplements rather than substitutes for maritime supply.
The lesson from Hormuz is not that Asia’s straits will be closed tomorrow. It is that the cost of disruption has dropped while the consequences have soared. A waterway need not be physically blocked to cause catastrophic damage — the threat alone reshapes insurance markets, reroutes shipping, and unsettles commodity prices. Both Washington and Beijing are absorbing that lesson in real time, quietly positioning for advantage in secondary corridors while the world’s attention remains fixed on the Persian Gulf. The question for Southeast Asian nations caught between them is whether the norms governing freedom of transit can survive when both great powers have demonstrated a willingness to treat strategic waterways as instruments of coercion.
Original analysis inspired by Lynn Kuok from Foreign Affairs. Additional research and verification conducted through multiple sources.
