Mekong Economies Reel from Middle East Energy Shock

As tensions intensify in the Middle East, Mekong basin economies are taking the full brunt of an energy shock that their fragile structures struggle to absorb.

Tuk-tuk queue at a Phnom Penh gas station. Photo CG

In an analysis published by the consulting firm Confluences Capital, one fact stands out: behind the brutal price surge lies a vulnerability embedded in the very foundations of the regional energy system. And Cambodia emerges as the most exposed breaking point.

The ASEAN, which now imports 66% of its crude oil—a five-year record—relies on external suppliers outside the zone for 92% of its needs. This exposure becomes critical when the Red Sea and the Strait of Hormuz, vital arteries through which nearly a quarter of the world's oil transits, turn into front lines.

“The Mekong's energy narrative is a matter of structure, not just price spikes,” the report emphasizes.

Unequal Vulnerabilities

Not all countries in the sub-region are equally affected, however. Thailand, the industrial giant, shows a 94% dependence on crude, while Vietnam, better equipped with refining capacity, drops to 47%. But it is Cambodia and Laos that concentrate the risk: lacking refining capacity, they import 100% of their finished products, including gasoline and diesel. For Phnom Penh, the bill has already swelled: fuel imports surged 12% in 2024, reaching $2.69 billion.

The shock's transmission is mechanical there. In March 2026, as a military escalation in the Middle East raises fears of another surge, pump prices skyrocket: in Vietnam, diesel and gasoline climb 17 to 21% in one week; in Thailand, the increase hits 10%, before being cushioned by the national oil fund. In Cambodia, the absence of this safety net translates into spectacular hikes: +42% for gasoline, +84% for diesel between February and March 2026.

Cambodia, a Laboratory for Conditional Resilience

Confluences Capital's study devotes a specific section to Cambodia, one of the most exposed countries.

“The impact of the Middle East conflict was immediate,” the document notes. In an economy where 88.3% of employment is informal, and incomes depend directly on operating costs—especially transport—the fuel price hike acts as a powerful inflation accelerator.

The authorities have responded by imposing price caps and drawing on reserves of about twenty-one days. A “budget stabilization” strategy that protects purchasing power in the short term but shifts volatility onto public finances.

“This shock reveals a fundamental characteristic of the Cambodian economy: cost increases are transmitted through logistics, not production,” the report analyzes.

Timid Start to Diversification

Faced with this structural vulnerability, signals of diversification remain modest but real. Cambodia approved a 150 MW wind farm project in Mondulkiri at the end of 2024, carried by HK Oasis Power with a $200 million investment.

Another 100 MW project is led by French firm Blue Circle in partnership with local conglomerate Royal Group. Stated goal: raise the share of clean energy in the electricity mix to 70% by 2030.

But these projects, slated for 2027, will only marginally alter an overwhelming dependence on imported coal and refined products.

“Their impact will remain gradual, warns Confluences Capital. Grid integration, execution timelines, and the scale of investments will determine the speed at which renewables can significantly reduce external dependence.”

Resilience Under Conditions

In total, the consulting firm paints a picture of a system that is “structurally dependent but operationally adaptive,” capable of maintaining continuity under stress through public interventions and flexible international sourcing. A resilience, however, hanging on two variables: the duration of external pressure on prices, and the states' ability to sustain their stabilization mechanisms over time.

“At Confluences Capital, we track these trends to anticipate turnarounds and capture new growth relays,” the study concludes. A mission that, in the current uncertainty, resembles economic analysis as much as geopolitical foresight.