Regional Summary
When Oil Prices Do the Diplomacy The Middle East energy shock is reshaping alliances and domestic politics across the Indo-Pacific faster than any diplomatic strategy. Governments from Seoul to Canberra are securing fuel supplies and using the crisis to push through economic reforms and grab power — moves that opposition parties would have blocked in calmer times. Lee Jae-myung, South Korea’s president, declared a “wartime footing” and unveiled a 26.2 trillion won supplementary budget, but the real story was the diplomacy around it. Within days he had strengthened ties with France to a “Global Strategic Partnership,” agreed to cooperate on keeping the Strait of Hormuz open and signed $10.2 billion in deals with Indonesia — calling Jakarta his “top strategic partner” to hedge against Middle Eastern suppliers. The opposition People Power Party, approval at 18%, could only watch as Mr Lee floated constitutional amendments that would have been unthinkable a year ago. Energy panic has become the solvent for political obstacles that predated it. Anthony Albanese, Australia’s prime minister, delivered an address of the sort usually reserved for war, urging fuel conservation and cutting excise — emergency pageantry that wrong-footed an opposition already fractured over whether to engage with government policy. The Reserve Bank used the moment to announce its biggest payments shake-up in decades, banning card surcharges from 2026, while its board split 5-4 over rate rises as oil neared $100 a barrel. The fuel shock has handed the government both an excuse to intervene and protection from criticism. Japan and Taiwan show the security side of this shift. Sanae Takaichi, Japan’s prime minister, revealed that Japan had stockpiled eight months of oil and four months of naphtha, then signed rare-earth and Hormuz-transit deals with France — quietly building backup plans against Chinese control of supplies. Taiwan’s president, Lai Ching-te, inspected a fivefold increase in domestic missile production, yet the island’s real vulnerability was political: the Nationalist Party chairwoman accepted Xi Jinping’s invitation to visit Beijing even as her party blocked $40 billion in defence spending that American senators flew to Taipei to champion. Both countries are finding new suppliers; the question is whether domestic politics can keep up. Three peacekeepers died in Lebanon, oil hit $100, and Prabowo Subianto, Indonesia’s president, responded by demanding a United Nations investigation, freezing subsidised fuel prices until 2026 and returning from Japan and South Korea with $34 billion in fresh commitments. Civil servants now work from home on Fridays to save money — small, visible austerity that signals discipline without provoking unrest. The budget already assumed $100 oil, so the shock validated the planners rather than panicking them. Across the Indo-Pacific, governments are using the energy crisis to speed up partnerships they already wanted, reforms they had shelved and power grabs they could not previously justify. The danger is that expedience dressed as emergency becomes permanent, and that voters notice only after the oil price falls.Country Summaries
South Korea
Lee Jae-myung, South Korea’s president, put the country’s economy on a “wartime footing” this week, announcing a 26.2 trillion won supplementary budget to tackle what he called the “worst energy security threat” from the Middle East war.
Mr Lee is not just throwing money at the crisis — he is building new partnerships to hedge against it. Emmanuel Macron’s state visit upgraded South Korea’s relationship with France to a Global Strategic Partnership, with both countries agreeing to cooperate on securing safe passage through the Strait of Hormuz. They set a target of $20 billion in bilateral trade by 2030 and will expand defence cooperation and nuclear energy partnerships. Mr Lee accepted an invitation to the G7 Evian summit.
Days later, Prabowo Subianto, Indonesia’s president, arrived with 10 memorandums worth $10.2 billion across energy, digital, health and infrastructure. Mr Lee called Indonesia South Korea’s “top strategic partner” and emphasised energy cooperation, including LNG supply, as a hedge against Middle East uncertainties. South Korea is diversifying its energy sources and diplomatic options.
Meanwhile, the domestic opposition has collapsed so much that constitutional change looks possible. The People Power Party’s approval rating fell to 18% while the ruling Democratic Party reached 49.9% — a record 30-point gap. The PPP is struggling to recruit candidates in Seoul, where its approval sits at just 13%. Six parties excluding the PPP proposed constitutional amendments requiring immediate parliamentary approval for martial law and adding the 1980 Gwangju Uprising to the constitution’s preamble. Mr Lee backed “partial constitutional revision within feasible scope.”
But Mr Lee’s economic team faces a problem. Shin Hyun-song, his nominee to lead the central bank, holds 55.5% of his assets overseas, with 98.4% of his financial assets in foreign currency. Critics worry about conflicts of interest over exchange rate policy when the won faces pressure from energy price shocks.
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- Lee Jae-myung leads comprehensive policy response to Middle East crisis economic impact — Lee Jae-myung, South Korea’s president, announced a 26.2 trillion won supplementary budget and convened bipartisan meetings to address the economic fallout from the Middle East war, calling it the ‘worst energy security threat’ and putting the economy on ‘wartime footing.’ (chosun.com)
- Samsung Electronics expects record quarterly profits amid AI chip boom — Samsung Electronics is projected to report around 40 trillion won in operating profit for Q1 2026, driven by surging memory chip prices and AI demand, despite recent stock volatility following Google’s TurboQuant technology announcement. (reuters.com)
- Yoon Suk-yeol receives substantial financial support while facing legal proceedings — Jailed former president Yoon Suk-yeol received over 1.2 billion won in inmate funds from supporters during eight months of detention, as his appellate trial on obstruction charges concludes and the first anniversary of his impeachment draws massive rallies both supporting and opposing him. (koreaherald.com)
Notes
Notes
President Lee Jae-myung leads comprehensive policy response to Middle East crisis economic impact
March 30 – April 05, 2026
French President Macron conducts state visit to South Korea, agrees on enhanced bilateral cooperation
April 2–3, 2026
Bank of Korea governor nomination and monetary policy developments amid economic uncertainty
March 31 – April 05, 2026
Constitutional amendment proposed to strengthen martial law restrictions following Yoon's impeachment
April 1–4, 2026
Former President Yoon Suk-yeol receives substantial financial support while facing legal proceedings
April 1–5, 2026
South Korea and Indonesia launch strategic partnership initiatives during Prabowo's state visit
April 1–2, 2026
Other
Taiwan
Cheng Li-wun, chairwoman of the Nationalist Party (KMT), accepted Xi Jinping’s invitation to visit China from April 7-12, the first trip by an opposition leader in a decade. The timing puts Taiwan in a bind: her party is blocking a $40 billion defence budget in parliament even as she prepares for the most senior opposition visit to Beijing since 2015.
The problem became clear this week when a bipartisan group of American senators visited Taipei to push for the stalled defence spending. Their trip showed the competing pressures — Washington wants Taiwan to spend more on defence while the KMT seeks talks with China and opposes the budget that would fund American weapons purchases.
Taiwan’s defence build-up continues despite the political fight. Lai Ching-te, the president, visited the National Chung-Shan Institute to inspect production of Brave Wind anti-ship missiles and Sky Bow air-defence systems. The institute has increased missile production fivefold since 2021, meeting targets two years early and now producing over 1,000 missiles annually.
Taiwan approved TSMC’s plan to produce advanced 3-nanometre chips at its second factory in Japan by 2028. This continues the company’s strategy of moving production beyond Taiwan, reducing the island’s leverage as the sole source of the world’s most advanced semiconductors.
Taiwan’s security agencies this week charged a former ruling-party aide with spying for China. Chu Cheng-chi had passed classified documents to Beijing handlers in 2022 for NT$20,000. The Democratic Progressive Party swiftly expelled him, showing that while infiltration remains a problem, defences still function.
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Other Stories
- US senators visit Taiwan to support $40 billion defence budget passage — A bipartisan delegation of American senators visited Taiwan to show support and urge passage of the stalled $40 billion special defence budget. The visit coincided with the opposition leader’s planned China trip, highlighting competing influences on Taiwan’s defence policy. (nytimes.com)
Notes
Notes
President Lai inspects missile production and meets with overseas business groups
March 30 – April 02, 2026
Other
Japan
China escalated pressure on Japan this week by sanctioning Keiji Furuya, a close aide to Sanae Takaichi who backed her rise to power, over his visits to Taiwan. Beijing accused him of “collusion with Taiwan independence” after he met Lai as part of a parliamentary delegation.
Beijing stepped up pressure, while Japan pushed ahead with building partnerships beyond Washington. Emmanuel Macron’s three-day state visit yielded deals on rare earth supplies and joint efforts to keep the Strait of Hormuz open during the Middle East crisis. The two leaders also agreed on nuclear energy ties and visited a Japanese space company. Indonesia’s Prabowo Subianto got the full diplomatic treatment at Akasaka Palace, with an audience with Emperor Naruhito and talks with Ms Takaichi on defence and economic deals.
Japan also showed it had prepared for the Middle East crisis. Ms Takaichi announced the country had secured at least four months of naphtha supplies and eight months of oil stockpiles. The deal with France provides a path to reduce dependence on Chinese rare earths.
Japan’s escape from deflation continued. The Finance Ministry set the April 10-year bond coupon at 2.4% — the highest in 28 years — as the Bank of Japan presses on with monetary tightening under Ueda.
Ms Takaichi faced political friction. She defended a proposed intelligence council bill against opposition claims it would violate privacy. The Liberal Democrats abandoned plans to pass the budget this week after opposition parties demanded more debate, and the party split over whether to criminalise desecration of the national flag.
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- Macron concludes three-day state visit to Japan with Emperor Naruhito meeting — French President Emmanuel Macron completed his state visit to Japan with a formal meeting and lunch with Emperor Naruhito and Empress Masako at the Imperial Palace. The visit included diplomatic talks with PM Takaichi and bilateral cooperation agreements. (nippon.com)
- Macron and Takaichi strike viral ‘Dragon Ball’ Kamehameha pose after summit talks — French President Macron and PM Takaichi ended their joint press conference with a playful recreation of the iconic ‘Kamehameha’ pose from the Dragon Ball anime series, creating a viral moment that mixed diplomacy with Japanese pop culture. (reuters.com)
- Takaichi defends national intelligence council bill amid privacy concerns from opposition — Sanae Takaichi, the prime minister, addressed opposition criticism over a proposed bill to establish a national intelligence council, stating it will not unnecessarily infringe on citizens’ privacy. Opposition parties have raised concerns about potential human rights violations. (sp.m.jiji.com)
- Takaichi plans Australia visit during Golden Week to discuss energy security — Prime Minister Takaichi is planning to visit Australia during Japan’s Golden Week holidays to meet with PM Albanese and discuss energy cooperation, rare earths, and Strait of Hormuz security. This would be the first visit by a Japanese PM to Australia since 2022. (nippon.com)
- Takaichi’s approval ratings decline amid public concerns over oil crisis response — A Kyodo News poll shows PM Takaichi’s Cabinet approval rating has fallen as public dissatisfaction rises over the government’s handling of oil supply disruptions linked to the Iran war, presenting a key test of public confidence. (english.realtribune.ru)
- LDP lawmakers delay retrial system reform bill over prosecutor appeal concerns — Liberal Democratic Party lawmakers are withholding approval of a Justice Ministry bill to overhaul the retrial system, demanding removal of provisions allowing prosecutor appeals against court decisions granting retrials for wrongfully convicted individuals. (japantimes.co.jp)
- LDP divided over criminalising national flag desecration bill — The Liberal Democratic Party shows internal division over a proposal to criminalise damage to the national flag, with some members pushing for immediate enactment while others express concerns about freedom of expression implications. (japantimes.co.jp)
Notes
Notes
Takaichi defends national intelligence council bill amid privacy concerns from opposition
March 30 – April 02, 2026
Japan secures four months of naphtha supplies amid Middle East energy crisis
March 31 – April 05, 2026
Other
Australia
Anthony Albanese delivered a national address this week to warn Australians of tough months ahead from the Middle East fuel crisis—the kind of moment usually reserved for wars or natural disasters.
The Prime Minister urged fuel conservation while confirming excise cuts, but Angus Taylor, the opposition leader, dismissed the speech as empty. The exchange showed how outside events are reshaping domestic politics, with the government betting on crisis leadership while the opposition struggles to respond.
Even as it managed the fuel crisis, the government pushed through economic reforms. The Reserve Bank of Australia (RBA) announced the biggest payment system overhaul in decades, banning surcharges on debit and credit cards from October 2026. The changes will save consumers $1.6 billion annually and businesses $200 million—a major intervention in how Australians pay for everything from groceries to fuel.
The reforms come as the bank’s board splits over interest rate timing, with minutes revealing a 5-4 divide on rate hikes. Board members fear that oil near $100 a barrel could lift inflation to around 5% and destabilise expectations, showing how the Middle East conflict directly shapes domestic economic decisions.
The opposition, meanwhile, is fracturing beyond leadership instability. Mr Taylor shut down Andrew Hastie, a frontbencher, when he suggested considering Labor’s tax proposals on gas companies and property concessions, exposing fundamental disagreements about economic positioning. The party can’t decide whether to oppose or engage with government policy.
On foreign policy, Australia is balancing alliance obligations and restraint. Penny Wong, the foreign minister, joined talks with over 40 countries to explore diplomatic solutions to the Strait of Hormuz crisis, while the defence minister confirmed E-7 Wedgetail aircraft are supporting the United Arab Emirates but denied Special Air Service (SAS) ground deployment to Iran. Australia will help diplomatically and defensively but won’t join offensive operations.
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- Albanese announces gambling advertising restrictions, falling short of Murphy report recommendations — The Prime Minister unveiled gambling reforms including caps on TV ads and stadium bans, but stopped short of the total advertising ban recommended by the Murphy report. Critics say the measures are insufficient. (theguardian.com)
- Angus Taylor delivers televised response criticizing Albanese’s fuel crisis leadership — Opposition Leader Angus Taylor used his right of reply to criticise the Prime Minister’s national address as lacking detail and clarity on the fuel crisis. Taylor called for faster development of domestic energy projects and accused the government of poor crisis management. (smh.com.au)
- Angus Taylor’s car stolen before fuel crisis press conference — Angus Taylor’s vehicle was stolen from his Canberra residence hours before he was due to hold a press conference on fuel prices. The theft occurred amid ongoing debate over the government’s fuel crisis response. (dailymail.co.uk)
Notes
Notes
Albanese delivers rare national address warning of tough months ahead due to Middle East war and fuel crisis
April 01, 2026
RBA bans card surcharges in payment system overhaul expected to save consumers \$1.6 billion annually
March 31, 2026
Albanese announces partial gambling advertising restrictions, falling short of Murphy report recommendations
April 1–5, 2026
Angus Taylor delivers televised response criticizing Albanese's fuel crisis leadership
April 02, 2026
RBA March meeting minutes reveal divided board on interest rate hikes amid Middle East crisis
March 31 – April 01, 2026
Liberal party split emerges as Angus Taylor rejects Andrew Hastie's calls for open mind on tax increases
March 30, 2026
Other
Indonesia
Three Indonesian peacekeepers died in attacks while serving with UN forces in southern Lebanon this week, but rather than retreat, Prabowo Subianto, the president, attended their memorial ceremonies and called for a UN Security Council meeting to investigate.
Captain Zulmi Aditya Iskandar, First Sergeant Muhammad Nur Ichwan, and Private First Class Farizal Rhomadhon were killed in separate incidents. Mr Prabowo’s response showed Indonesia’s approach to its peacekeeping commitments — it ranks fifth globally with 2,752 personnel deployed — treating deaths as risks to manage rather than reasons to withdraw.
Even as it mourned its soldiers, Indonesia continued building partnerships elsewhere. Mr Prabowo completed state visits to Japan and South Korea worth $34 billion in business commitments. In Seoul, he received South Korea’s highest state honour and signed ten agreements covering energy, technology, and critical minerals. The countries upgraded their relationship to a strategic partnership, with Seoul agreeing to help develop Indonesia’s nuclear energy capacity.
The visits showed Indonesia’s approach: build partnerships issue by issue while keeping options open. The $34 billion in commitments are dwarfed by China’s position as Indonesia’s largest trading partner with $135 billion in trade last year. But they represent efforts to diversify away from that dependence.
At home, the government managed a different kind of pressure. Global oil hit $100 per barrel, but Purbaya Yudhi Sadewa, the finance minister, said subsidised fuel prices would stay frozen until the end of 2026. To save money, civil servants now work from home on Fridays. The budget already assumes oil at $100, keeping the deficit at 2.92% of GDP.
Gibran Rakabuming Raka, the vice-president, is preparing to move his office to Nusantara, the new capital. Fifty staff are already there installing furniture. Teddy Indra Wijaya, the cabinet secretary, spent 90 minutes with Mr Gibran at the vice-presidential palace, discussing policy in what observers saw as an attempt to give the previously sidelined vice-president a real role.
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- Daniel Muttaqien elected as new Golkar West Java chairman in party congress — Daniel Muttaqien was elected chairman of Golkar’s West Java chapter during the party’s regional congress. The leadership change positions Golkar for the 2029 elections, with West Java seen as strategically important for national politics. (republika.co.id)
- Bank Indonesia maintains monetary policy stance amid global economic uncertainty — Bank Indonesia continued several policies including cross-border payment cooperation with South Korea through QRIS, while economists assess credit growth prospects and inflation dynamics. The central bank faces challenges from global geopolitical tensions. (crowdfundinsider.com)
- Former VP Jusuf Kalla provides economic and diplomatic recommendations to President Prabowo — Jusuf Kalla, the former vice-president, revealed he has submitted recommendations on economic and diplomatic policies to Mr Prabowo, collected from activists and academics. He plans to meet directly with the president to discuss the proposals. (video.kompas.com)
- Prabowo government announced as serious about developing alternative energy — Experts praised Bahlil Lahadalia, the energy minister, for cooperation with South Korea on nuclear and mineral development, saying it proves the Prabowo administration is serious about exploring alternative energy sources and maintaining national energy stability. (investor.id)
- Government budget will cover Red and White Village Cooperative installments — Mr Sadewa confirmed the state budget will be used to pay instalments for the Red and White Village Cooperative development, with funding from village funds, general allocation funds, and regional revenue sharing. (jawapos.com)
- President Prabowo monitors earthquake and tsunami impact in North Sulawesi — Mr Prabowo received reports on the M7.6 earthquake followed by tsunami in Bitung, North Sulawesi, and ordered rapid evacuation of residents. The disaster response included areas in North Maluku as well. (santrindalan.id)
- Opposition activists call for Prabowo to show stronger support for Iran and Palestine — Political activists and opposition figures called on Mr Prabowo to show stronger support for Iran and take tougher stances against Israel and the United States, particularly after Indonesian peacekeepers were killed in Lebanon. (gelora.co)
Notes
Notes
Three Indonesian UN peacekeepers killed in Lebanon, additional soldiers injured in follow-up attack
April 02, 2026
Prabowo completes state visits to Japan and South Korea, securing \$10 billion in investment commitments
April 1–2, 2026
Government maintains fuel prices despite global oil crisis, implements work-from-home policy
March 31 – April 03, 2026
Vice President Gibran prepares to work from IKN with 50 staff already deployed
March 30 – April 02, 2026
Cabinet Secretary Teddy meets Vice President Gibran for extensive private discussions
April 04, 2026
Bank Indonesia maintains monetary policy stance amid global economic uncertainty
March 31 – April 03, 2026
Former VP Jusuf Kalla provides economic and diplomatic recommendations to President Prabowo
April 03, 2026
Opposition activists call for Prabowo to show stronger support for Iran and Palestine
April 2–5, 2026
Other