Regional Summary
The Hormuz Hedge The Middle East oil shock hitting the Indo-Pacific this week reveals that governments across the region are turning economic vulnerability into political opportunity, and most are seizing the moment to concentrate power rather than share it. From Canberra’s emergency fuel requisitions to Jakarta’s resource nationalism, from Seoul’s energy-conservation blitz to Tokyo’s constitutional tap-dance, leaders are using external disruption as an excuse to do things they already wanted to do. This opportunism is reordering domestic politics faster than any adversary could. Australia offers the starkest case. Anthony Albanese, the prime minister, decided to take emergency powers to buy fuel, release strategic stocks and slash petrol taxes — the heaviest state intervention in the economy since the pandemic. Yet the political payoff is handsome: six in ten voters blame Donald Trump for the crisis while barely one in seven blame the government. The deeper shift is structural. A country that for decades outsourced its energy security to global markets now faces the harsh arithmetic that its marquee defence project, AUKUS, may never deliver the submarines Washington and London promised, even as the crisis it was meant to insure against has arrived early. Mr Albanese is converting a supply shock into a mandate for state control, and voters so far seem grateful rather than alarmed. Lee Jae-myung, South Korea’s president, is playing a subtler game. His nomination of Shin Hyun-song, a hawk who predicted the crisis, to run the central bank signals that he wants a monetary authority willing to tolerate a weaker won if it means preserving room to spend. The Bank of Korea’s record profits from dollar-selling interventions — a windfall that lets the government pocket foreign-exchange gains while the currency slides — buy Mr Lee fiscal space just as he launches emergency budgets and twelve-step conservation campaigns. He is also speeding up the timeline for reclaiming wartime operational control from Washington and considering dropping co-sponsorship of the UN resolution on North Korean human rights. Taken separately, each move makes sense. Taken together they reveal a president using the fog of a Middle Eastern war to redraw South Korea’s security posture without provoking a direct confrontation with its American ally. Japan’s manoeuvre is the most elegant of the lot. Sanae Takaichi, the prime minister, refused Trump’s request for destroyers in the Strait of Hormuz, citing Article 9 of the pacifist constitution — a document that has never stopped Tokyo from doing anything it truly wished to do. The real payment came in Alaskan crude-oil contracts and the implicit promise of mine-clearing expertise after any ceasefire. Yet even as Japan demurred on Hormuz, it quietly abolished its sixty-year-old Fleet Escort Force and created a leaner, more offensive naval structure designed for island defence against China. The restructuring, dressed up as administrative tidying, is the most significant reorganisation of Japan’s surface fleet in a generation. Tokyo is using constitutional scruples to avoid one theatre while retooling for another. Lai Ching-te, Taiwan’s president, has decided to restart nuclear plants — shattering the Democratic Progressive Party’s environmental orthodoxy — in what amounts to crisis realism dressed as pragmatism: an island whose semiconductor fabs are already choking global supply chains cannot afford to run short of electricity. In Jakarta, Prabowo Subianto, Indonesia’s president, launched a $16 billion push to control domestic processing of raw materials before the Hormuz disruption but has been supercharged by it; telling your energy minister that natural resources are “strategic assets” under state control sounds more reasonable when two Pertamina tankers are stranded in the Persian Gulf. Both leaders are converting external threat into domestic authority, sidelining opponents who might otherwise object. Across the Indo-Pacific, elected leaders are exploiting a genuine external shock to accelerate existing agendas — centralising economic control, reshaping military command, reversing long-held party doctrines, and recalibrating alliance obligations — all while pointing to the crisis as justification. What distinguishes this week is the timing of the manoeuvre, and the speed with which democratic publics are acquiescing. The risk, as always, is that powers grabbed in emergencies outlast the emergencies themselves.Country Summaries
South Korea
Lee Jae-myung, South Korea’s president, nominated Shin Hyun-song as the country’s new central bank governor this week, picking a hawkish economist who predicted the 2008 financial crisis. The choice comes as South Korea faces pressure from the Middle East conflict.
Mr Shin, who works for the Bank for International Settlements, brings international experience to monetary policy as South Korea confronts an energy squeeze. Mr Lee launched a 12-step conservation campaign — shorter showers, less driving — and promised an emergency budget as the Iran conflict threatens to disrupt oil supplies. The won has fallen to its fourth-lowest monthly level this year as foreign investors dump Korean assets and oil prices surge.
Even as the currency weakened, the Bank of Korea posted record profits of 15.3 trillion won from its dollar-selling interventions, paying over 10 trillion won to the government. A weak won alongside profitable forex operations shows Mr Lee is managing external pressure while keeping his options open.
Mr Lee is taking the same approach to defence. He attended the launch ceremony for South Korea’s first mass-produced KF-21 fighter jet, calling it a step toward joining the world’s top four defence powers. The supersonic fighter, which completed over 1,600 test flights, gives Mr Lee the self-reliant capability he wants as he pushes for early recovery of wartime operational control from the United States.
Yet Mr Lee is playing both sides. Even as he accelerates the timeline for taking back operational control, Seoul is considering skipping co-sponsorship of the annual UN resolution on North Korean human rights — a move that would keep diplomatic channels open with Pyongyang while frustrating Washington and human rights groups.
At home, Mr Lee’s approval rating dipped to 65% from 67%, where it had been for three weeks, but his position remains strong as the opposition People Power Party (PPP) hits record-low support at 19%. The party faces nomination disputes and internal chaos ahead of June local elections. Mr Lee courted his progressive base this week by visiting Jeju Island for the 78th anniversary of the April 3 massacre, pledging to eliminate statutes of limitations for state violence and make perpetrators accountable “like Nazi war criminals.”
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- Lee Jae-myung launches nationwide energy conservation campaign amid Middle East crisis — President Lee Jae-myung called for a 12-step energy-saving campaign including shorter showers and reduced car use as the Iran war threatens oil supplies. The government announced plans for an emergency supplementary budget and market stabilization measures. (nytimes.com)
- Samsung launches browser for Windows, expands ecosystem integration — Samsung officially released Samsung Browser for Windows after beta testing, featuring AI-powered search via Perplexity and cross-device synchronization with Galaxy phones. The move represents Samsung’s push into the desktop computing space. (theverge.com)
- People Power Party faces internal turmoil ahead of local elections — The opposition PPP struggled with nomination disputes, spokesperson controversies, and difficulty finding competitive candidates for key races like Gyeonggi governor, while support ratings hit record lows at 19%. (koreatimes.co.kr)
- Seoul considers not co-sponsoring UN North Korea human rights resolution — The Lee administration faces criticism for potentially skipping co-sponsorship of the annual UN resolution on North Korean human rights, with human rights organizations urging continued support despite diplomatic considerations. (hrw.org)
- Bank of Korea posts record 15.3 trillion won profit on forex interventions — The BOK reported record net profits driven by dollar-selling operations and U.S. equity gains, with the central bank paying over 10 trillion won to the government and extending financial network hours ahead of bond index inclusion. (chosun.com)
- Actor Lee Sang-bo found dead at 45 following past drug scandal — South Korean actor Lee Sang-bo was found dead at his home in Pyeongtaek. He had previously faced false drug accusations in 2022 but was cleared of charges. The cause of death was not disclosed by his family. (mk.co.kr)
Notes
Notes
Lee Jae-myung launches nationwide energy conservation campaign amid Middle East crisis
March 24–26, 2026
Shin Hyun-song nominated as Bank of Korea governor, promises balanced monetary policy
March 23, 2026
Lee visits Jeju April 3 memorial, vows to abolish statute of limitations for state violence
March 29, 2026
Other
Australia
Australia’s government took emergency powers to buy fuel and scrapped petrol taxes as the Middle East war triggered the country’s worst energy crisis since the 1970s, forcing the biggest economic intervention since Covid.
Anthony Albanese, the prime minister, announced new powers letting the government back private fuel purchases and buy essential goods directly. The government released 20% of its strategic fuel stocks, halved petrol taxes for three months, and scrapped heavy vehicle charges. The moves show how external shocks are pushing Canberra toward greater state involvement in markets.
The Reserve Bank responded by raising interest rates to 4.1%, the second straight rise driven by war-related inflation fears. Officials warned they may tighten further if energy price spikes lift inflation expectations. Australia also signed a major trade deal with the European Union, scrapping most tariffs after eight years of talks.
The fuel shock has also strained Australia’s alliance with America. Donald Trump called Australia “not great” for weak support in the Iran conflict, his second public criticism of the country. Mr Albanese pushed back, saying Australia had agreed to every American request, including deploying surveillance aircraft to the Gulf. Australia is also taking tougher positions elsewhere — Penny Wong, the foreign minister, warned Israel against occupying southern Lebanon and raised concerns about West Bank settler violence.
Politically, the government is managing the crisis well. Polling shows 61% of voters blame Mr Trump for the fuel crisis while only 14% blame the government. But politics remains volatile, with the opposition Liberal Party suffering heavy losses in South Australia as the populist One Nation party gained seats. Polls now show One Nation at 28% nationally versus the Liberals at 18%, a reversal that threatens Australia’s traditional two-party system.
The fuel crisis has revived debate over Australia’s biggest defence project. Peter Briggs, a former submarine commander, warned the AUKUS programme faces complete failure because America and Britain lack the factories to build the submarines. Defence officials defended the programme, saying abandonment would leave Australia with no submarines at all.
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- RBA advances tokenisation initiative projecting $24 billion annual efficiency gains — The Reserve Bank of Australia concluded Project Acacia research and announced plans for new digital financial market infrastructure sandbox. The bank said the debate had shifted from whether to implement tokenisation to how, citing potential $24 billion yearly benefits. (afr.com)
- Angus Taylor consolidates opposition leadership amid Liberal Party struggles in SA election — Angus Taylor, the coalition leader, called for fuel excise cuts and addressed cost of living issues as polls showed continued challenges. The Liberal Party suffered devastating losses in South Australia’s election while One Nation gained seats, prompting calls for party reform. (7news.com.au)
- Albanese government faces political pressure from crossbench over gas export taxation — Independent MPs and some Labour backbenchers called for new gas export taxes to capture wartime profits while industry warned against damaging trade relationships. Growing public support emerged for taxing gas companies amid rising fuel costs. (theguardian.com)
- Albanese celebrates Greek Independence Day amid multicultural outreach efforts — Mr Albanese issued an official message honouring Greek Independence Day and the Greek-Australian community’s contributions. This followed his controversial visit to Lakemba Mosque where he faced hostile reception from protesters. (greekreporter.com)
Notes
Notes
Australia and EU finalize \$10 billion free trade agreement after eight years of negotiations
March 24, 2026
RBA advances tokenization initiative projecting \$24 billion annual efficiency gains
February 28 – March 26, 2026
AUKUS submarine program faces criticism as costs mount and delivery timelines questioned
March 23–27, 2026
Angus Taylor consolidates opposition leadership amid Liberal Party struggles in SA election
March 15–30, 2026
Penny Wong confronts Middle East tensions while defending government against Opposition attacks
March 14–29, 2026
Albanese government faces political pressure from crossbench over gas export taxation
March 23–28, 2026
Other
Taiwan
Surging AI demand has pushed Taiwan Semiconductor Manufacturing Company to its production limits, creating bottlenecks that will stretch through 2026 and expose vulnerabilities in Taiwan’s economic foundation. Broadcom warned that the company’s constraints have “choked the supply chain,” with lead times for some components stretching from six weeks to six months.
As Taiwan’s biggest chipmaker hits these limits, the island’s politics are fracturing. Lai Ching-te, the president, confirmed plans to restart two nuclear plants by year-end, breaking the Democratic Progressive Party’s (DPP) anti-nuclear stance and triggering protests outside government buildings. The Kuomintang (KMT) demanded apologies for past energy policies. The reversal breaks with doctrine that has defined the DPP’s environmental platform for decades.
The political turmoil deepened when Ko Wen-je, the former Taipei mayor and founder of the Taiwan People’s Party (TPP), was sentenced to 17 years for bribery and corruption. The TPP called for supporters to rally in Taipei, claiming political persecution. Mr Ko’s lengthy sentence disrupts Taiwan’s three-party balance.
Meanwhile, the KMT is strengthening its ties with Beijing. Cheng Li-wun, the party’s chairwoman, accepted Xi Jinping’s invitation to visit China next month, hoping to promote cross-strait peace based on the “1992 consensus.” The April visit would mark the first meeting between a KMT chair and the Chinese president since the Ma-Xi summit in 2015, the opposition’s biggest Beijing engagement in nearly a decade.
The People’s Liberation Army continued routine activities around Taiwan, with 19 aircraft detected on March 29 and 13 crossing the median line. The sorties were standard grey-zone operations, not an escalation.
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- China criticizes Lai Ching-te over Japan relations and judicial issues — Chinese officials condemned President Lai Ching-te for comments defending Japan’s colonial rule and for allegedly manipulating Taiwan’s judiciary to suppress political opponents. Beijing described these actions as ‘green terror’ and ‘betrayal of the nation.’ (english.news.cn)
- Taiwan marks 30th anniversary of direct presidential elections — President Lai Ching-te commemorated the 30th anniversary of Taiwan’s first direct presidential election, calling on the legislature to pass a special defense budget to safeguard democracy. The milestone highlighted Taiwan’s democratic transition and current challenges. (focustaiwan.tw)
- Taiwan strengthens Japan partnership amid regional tensions — President Lai pledged to deepen cooperation with Japan and like-minded partners to maintain regional peace, emphasizing Taiwan’s commitment to expanding the Taiwan-Japan partnership despite Chinese criticism of his pro-Japan stance. (taiwannews.com.tw)
Notes
Notes
President Lai announces nuclear power restart amid protests and political backlash
March 24–26, 2026
Other
Japan
Japan deflected American demands for naval vessels in the Strait of Hormuz by citing its pacifist constitution, while offering Donald Trump economic sweeteners to keep the alliance intact.
Sanae Takaichi, the prime minister, met the American president on March 19 and refused his request for Japanese destroyers to patrol Middle Eastern waters. She cited Article 9, which bars overseas military operations, but doubled Japan’s imports of Alaskan crude oil as compensation. Motegi, the foreign minister, said Mr Trump showed “understanding” of Japan’s legal limits and suggested Japanese mine-clearing operations after any ceasefire, using Japan’s advanced naval mine technology.
The exchange showed how Japan navigates alliance pressure: it cannot send ships to fight but can send money and expertise instead. This follows the pattern set when Japan committed $550 billion in American investments rather than matching Washington’s military spending demands.
Even as it deflects American pressure, Japan is reshaping its navy for a potential war with China. The Maritime Self-Defense Force scrapped its 60-year-old Fleet Escort Force this week and created the Fleet Surface Force, consolidating four escort flotillas into three surface warfare groups. It also created an amphibious and mine warfare group in Sasebo. The overhaul should speed up decisions for defending remote islands as China grows more assertive. The defence chief called it a “force density increase,” not a cut.
At home, Japan released 30 days’ worth of state oil reserves to counter Middle East turmoil, after private companies had already released 15 days’ worth. Wage negotiations delivered a 5.26% average increase for permanent employees — the third consecutive year above 5%, though down from 2024’s 5.46%.
The ruling Liberal Democratic Party meanwhile acknowledged it was only “halfway” to regaining public trust after its slush fund scandals. It abandoned hopes of passing the 2026 budget on time and passed a provisional budget instead on March 30. The party’s policy platform promised not to become “arrogant” despite its electoral landslide.
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- Prabowo arrives for state visit with Emperor Naruhito — Prabowo Subianto, Indonesia’s president, arrived in Tokyo on March 29 for meetings with Emperor Naruhito and Prime Minister Takaichi. The visit aims to strengthen bilateral cooperation in defence and economics. (cnnindonesia.com)
- Liberal Democratic Party acknowledges still ‘halfway’ to regaining public trust — The Liberal Democratic Party’s (LDP) 2026 policy platform draft states the party is still only halfway to restoring trust following the slush funds scandal. The platform outlines Prime Minister Takaichi’s fiscal and economic policies while acknowledging ongoing work to rebuild party credibility. (nippon.com)
- Japan Innovation Party pushes for faster constitutional reform — Japan Innovation Party opened its regular convention March 21, emphasising cooperation with the Liberal Democratic Party (LDP) on constitutional amendment. The party wants to make Article 9 explicit about Japan’s right of self-defence and establish concrete amendment schedules. (japan-forward.com)
- Spring wage negotiations deliver 5.26% average increase — The Japanese Trade Union Confederation reported March 23 that unions achieved an average 5.26% wage rise for permanent employees in the spring labour negotiations. The Keidanren chairman offered a positive assessment from the management side. (asahi.com)
Notes
Notes
Takaichi cites Article 9 constraints in response to Trump's Strait of Hormuz request
March 23–26, 2026
Other
Indonesia
Indonesia is pouring Rp 239 trillion into new downstreaming projects as Prabowo Subianto speeds up the country’s resource nationalism push.
The president ordered 13 new projects focusing on mineral processing and energy independence, telling his energy minister that natural resources must remain under state control as “strategic assets.” The scale is a major jump in state intervention — far beyond usual policy changes.
Even as Mr Prabowo strengthens state control over the economy, his military showed it can police itself. Lieutenant General Yudi Abrimantyo, head of military intelligence, resigned after four of his staff were implicated in an acid attack on human rights activist Andrie Yunus. The TNI stressed “zero tolerance” for criminal behaviour, though civil society groups demanded the case go to civilian courts rather than military tribunals.
The government also dealt with a crisis when Iran’s restrictions on the Strait of Hormuz stranded two Pertamina tankers in the Persian Gulf. The foreign ministry reported “positive” Iranian responses to requests for passage, with talks continuing.
Meanwhile, Mr Prabowo clarified Indonesia’s approach to the US-led Board of Peace initiative, denying he had pledged $1 billion and warning that Indonesia might withdraw if the effort proves “harmful to Palestinian welfare.” The stance shows Indonesia’s usual pattern: join international frameworks while setting clear limits and keeping exit options open.
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- President Prabowo begins state visit to Japan, meets Emperor Naruhito and PM Takaichi — Prabowo Subianto departed for Japan on March 29 for a three-day state visit, his first trip to Japan since taking office. He will meet Emperor Naruhito and Sanae Takaichi, the prime minister, to strengthen bilateral cooperation in trade, technology, education, forestry and environment. (scmp.com)
- Vice President Gibran visits Islamic boarding schools during Eid, emphasises religious harmony — Gibran Rakabuming Raka, the vice-president, visited multiple Islamic boarding schools during Eid celebrations in Central Java, meeting with religious leaders to stress religious harmony and social cohesion. He also discussed development programmes and requested prayers for former President Jokowi’s health. (antaranews.com)
- Prabowo orders cheap market at Monas and visits railway settlement residents — Prabowo instructed officials to organise a cheap market at Monas providing 100,000 food packages worth Rp 50 billion to Jakarta residents. He also made an unannounced visit to railway settlement communities in Senen, engaging directly with residents about housing needs. (metrotvnews.com)
- Prabowo meets investor Ray Dalio to discuss Danantara and economic growth prospects — Prabowo received global investor Ray Dalio at Merdeka Palace to discuss strengthening Indonesia’s economic growth and expanding Danantara’s role. The meeting focused on projections for economic development and Danantara’s strategic role as a driver of national economic growth. (idnfinancials.com)
- Danantara responds to A24 studio investment rumours and faces questions over strategy — Sovereign wealth fund Danantara addressed social media rumours about potential investment in US film studio A24, emphasising that all investment decisions consider long-term national economic impact. The controversy highlighted ongoing scrutiny of Danantara’s investment focus and role. (cnnindonesia.com)
- Government implements work-from-home policy to reduce fuel consumption — Tito Karnavian, the home affairs minister, announced ministers agreed to implement one day per week work-from-home policy for civil servants to reduce fuel consumption amid rising oil prices. The policy awaits formal announcement after reporting to Mr Prabowo. (detik.com)
- Bank Indonesia and financial sector manage holiday operations and respond to oil crisis — Indonesian banks including BRI, BNI, BCA and Mandiri operated with limited hours during Eid holidays before returning to normal March 25. Bank Indonesia maintains 4.75% interest rate amid oil price volatility, while financial authorities coordinate responses to the energy crisis. (kompas.com)
Notes
Notes
President Prabowo begins state visit to Japan, meets Emperor Naruhito and PM Takaichi
March 15–29, 2026
Prabowo rejects \$1 billion Board of Peace membership fee, clarifies Indonesia's role
March 23, 2026
Vice President Gibran visits Islamic boarding schools during Eid, emphasizes religious harmony
March 26–27, 2026
Two Pertamina oil tankers remain stranded in Persian Gulf amid Hormuz Strait restrictions
March 28–29, 2026
Prabowo accelerates downstreaming projects with 13 new initiatives worth Rp 239 trillion
March 25–26, 2026
Danantara responds to A24 studio investment rumors and faces questions over strategy
March 24–26, 2026
Bank Indonesia and financial sector manage holiday operations and respond to oil crisis
March 23–25, 2026
Other