The ceasefire lasted exactly four weeks. On May 5, Iran launched missiles at the United Arab Emirates, marking the first major attack since hostilities were supposed to have paused. The strike shattered the Gulf's carefully constructed truce and immediately rattled global energy markets. Oil prices surged on fears of supply disruption through the Strait of Hormuz, the world's most critical energy chokepoint, through which roughly one-third of all seaborne traded oil passes.
For Asia, the timing could hardly be worse. The region's economies—Japan, South Korea, China, India—depend on reliable Gulf energy supplies to power their industrial bases and keep inflation under control. Japan's central bank has signaled hawkish positioning amid rising energy costs. Australia's Reserve Bank faces similar pressure. The U.S. Treasury has warned that paying Iranian tolls could trigger sanctions, but shipowners face an impossible choice: risk American penalties or accept Tehran's demands for passage fees. Insurance costs and shipping delays have already begun to bite.
The escalation forces Asian capitals into uncomfortable diplomatic territory. The U.S. is calling on China, Japan, and allies to join a Hormuz operation—effectively asking them to participate in containing Iran while maintaining the energy relationships they need. China, already hedging its Middle East bets through defense spending in Southeast Asia, finds itself caught between Washington's security demands and Tehran's energy significance. The summit dynamics that will unfold this month are now shadowed by military uncertainty in a region Asia cannot afford to see destabilize.
Markets are already pricing in the volatility. HSBC has flagged Middle East war risk in its credit analysis. Goldman Sachs sees early signs of Australian M&A rebound, but energy-sector uncertainty clouds the outlook. The fundamental problem is structural: Asia's economies have optimized for stable energy prices and reliable supply chains. Iran's willingness to break a ceasefire suggests neither assumption can be taken for granted. Whether the Trump-Xi summit produces arrangements that stabilize the Gulf—or whether this represents the beginning of a new escalatory cycle—will reverberate through Asian growth forecasts for the rest of 2026.
