Markets across Southeast Asia saw a sharp recovery on April 7 following the announcement of a two-week ceasefire between the United States and Iran. The reprieve comes after a period of intense volatility that left the region grappling with the fallout of a conflict thousands of miles away, highlighting how deeply the Iran war hurts ASEAN and its fragile economic stability.
The fiscal impact was immediate and severe. For nations that heavily subsidize fuel, the spike in petroleum prices forced governments to either drastically curtail or entirely abandon those subsidies to avoid financial collapse. This economic shock triggered internal political tensions and heightened fears of a global recession, as Southeast Asia found itself among the first regions to suffer from the disruption of petroleum-based supplies.
The crisis has also accelerated a shift in geopolitical sentiment. According to polling from the ISEAS Yusof Ishak Institute in Singapore, the primary concern for the region has shifted from China’s behavior in the South China Sea in 2025 to the nature of U.S. Leadership under Donald Trump as the top worry for 2026. In a telling metric of shifting loyalty, a slight majority of respondents now opt for China over the U.S. When asked to choose between the two strategic rivals—a reversal from the previous year.
A Fraying Relationship with Washington
The current disillusionment is not an overnight phenomenon but the result of a long-term erosion of American “soft power.” Regional observers note that the “pivot to Asia” initiated by the Obama administration failed to materialize in a meaningful way, particularly when U.S. Efforts to mediate disputes between China and the Philippines resulted in Manila withdrawing whereas Beijing maintained its presence on contested shoals.
Under the Trump administration, this friction intensified. While the administration focused on countering China, its tactics—including aggressive tariffs and restrictive immigration policies—were often perceived as indifferent or contemptuous. The closing of doors to students and migrants undermined the cultural and educational ties that had buoyed U.S.-ASEAN relations since the Cold War.
The attack on Iran served as a catalyst for nations to reconsider their strategic alignments. Philippine President Ferdinand Marcos Jr. Signaled a “very, very serious restructuring” or “reset” of relations with China. While Manila continues to navigate a complex path—securing U.S. Waivers to purchase sanctioned Russian crude and meeting with U.S. Undersecretary of Defense for Policy Elbridge Colby in New York—the rhetoric has shifted from “performative martyrdom” toward a more pragmatic dialogue with Beijing.
The Limits of Chinese Influence
Despite the dip in U.S. Popularity, it remains unclear if China is positioned to fully capitalize on the vacuum. While the Iran war hurts ASEAN economically, the disruption also hammered Beijing. China’s own aspirations for energy self-sufficiency remain unfulfilled, and the disruption of oil deliveries forced Beijing to leverage its influence over Tehran to secure the ceasefire for its own survival.
China’s reliability as a security partner is questioned. Singapore, for instance, refused to negotiate safe passage through the Strait of Hormuz, noting that China and Russia used their vetoes at the UN Security Council to kill a resolution calling for the reopening of the strait. For Singapore, whose economy relies on the vulnerability of the Strait of Malacca, this action undermined a principle of existential importance.
The crisis has instead fostered a new kind of regional interdependence. In the absence of consistent U.S. Support, neighbors are leaning on one another:
- Japan utilized its strategic reserves to support the oil needs of allies, including the Philippines and Australia.
- South Korea and Japan are seeing an increase in regional arms sales as countries like Indonesia and the Philippines pivot away from American military hardware.
- Strategic Affinities are forming based on geographic necessity rather than ideological alignment.
The Persistent Necessity of the U.S.
Despite the friction, Washington remains the central pillar of the architecture used to deter Chinese aggression. The potential for a flashpoint in Taiwan serves as a constant reminder to ASEAN that a conflict closer to home would be far more devastating than the Middle Eastern crisis.
| Country | Action/Response | Strategic Driver |
|---|---|---|
| Philippines | Proposed “reset” with China | Economic pragmatism and energy security |
| Indonesia | Rejected $1B “Board of Peace” fee | Avoidance of domestic political backlash |
| Singapore | Refused Iran Hormuz negotiations | Protection of maritime trade principles |
| Japan | Released strategic oil reserves | Regional stability and ally support |
The region’s dissatisfaction with Washington is tempered by a profound caution toward Beijing and the undeniable reality that Southeast Asian economies require continued access to American markets. The current environment is one of “diminished affection” but continued reliance.
Moving forward, the region is looking toward a more robust regional defense framework and strategic arrangements with Gulf States that are themselves antagonized by Iran. The next critical checkpoint will be the 2026 ASEAN meetings, chaired by Manila, which will serve as a bellwether for whether the “reset” in relations with China leads to genuine stability or further entanglement.
We invite readers to share their perspectives on the shifting dynamics of ASEAN-US relations in the comments below.
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