Australia's response at the government level was, by most measures, proactive, considered and effective. The policy architecture, the bilateral relationships, the trade agreements held up and, in some cases, proved their value in ways that surprised even their architects. The less consistent story was at the business level - where the gap between organisations that were genuinely positioned to operate through the disruption and those that were still working out their exposure became visible quite quickly.
Most businesses operating across Asia went into this year believing they understood their regional exposure. The Hormuz disruption tested that belief, and what it found was not primarily an energy security story. It was a test of whether organisations had genuine capability to operate across Asia under pressure – or whether they had presence and assumed it would be enough. The difference, as it turns out, has a cost.
The Hormuz crisis brought those gaps into sharp focus for Australian businesses – and it reached further than the Middle East. The Strait is now a geopolitical bargaining tool as much as a shipping lane, and when it moved, everything connected to Asia moved with it.
Supply chains running through Singapore, offtake agreements priced in Tokyo, procurement relationships in Seoul, financing structures in Hong Kong: all were disrupted when the Strait closed.
How organisations responded was determined less by what they did at the time than what they had already built – the relationships that could carry a difficult conversation, the internal governance and authorities to move quickly, the supply chain mapping that meant the first response was decision rather than discovery.
The disruption was not without context for Australia. China’s trade measures in recent years had already forced many companies to diversify markets, test alternatives and rethink the assumption that commercial relationships are insulated from politics. That experience created a kind of institutional memory; it is part of why the Hormuz disruption, seen in hindsight, looks less like a shock than an event waiting to happen.
In this article, we examine what that event revealed in practice, what the regulatory and policy environment now requires, and why the question of whether an organisation has genuine Asia capability (not presence, but capability) has become one of the most consequential questions on the board agenda.
The quick view
- The Strait of Hormuz is now a geopolitical bargaining tool as much as a shipping lane – the disruption has not ended, it has been paused
- Governments across Asia intervened in markets faster and further than most businesses had planned for – and the policy settings they put in place are not being unwound
- Australia’s positioning in LNG, critical minerals and regional trade relationships gave Australian businesses practical advantages – an advantage available only to those that had already built on those relationships
- Regulatory and contractual frameworks were tested against scenarios most had not seriously considered – a significant volume of force majeure clauses have been activated and rights reserved in response, with disputes about the application of force majeure to come
- APRA has formally directed banks, insurers and super funds to treat geopolitical risk as an enterprise-wide discipline – the businesses they lend to and insure should expect to be asked the same questions
- The disruption revealed which organisations had genuine Asia capability and which didn’t, and the consequences - contractual, regulatory and reputational – are still unfolding
What four months of disruption revealed
The way the disruption unfolded across the region illustrated, very clearly, what genuine capability looks like in practice – and what its absence can cost.
The war in the Middle East is creating the largest supply disruption in the history of the global oil market. - International Energy Agency, March 2026
Australia’s response
The policy response confirmed that governments are now prepared to intervene in commercial markets at speed and scale, and that the bilateral relationships Australia had been building across the region carry genuine practical value; primarily, however, for businesses already positioned to use them.
The response was swift. Within weeks the federal government had set up cost-sharing for fuel shocks, coordinated across the supply chain and widened Export Finance Australia’s mandate to underwrite fuel purchases from overseas. By May, that early response had been overtaken by something much bigger: an $11.9 billion National Fuel Security Plan, including a $3.2 billion fuel reserve, a $7.5 billion facility to underwrite supply and storage, and minimum stockholding obligations for diesel and jet fuel being pushed toward 50 days’ cover.
None of this has been unwound. Federal and state governments that have just committed billions to fuel security do not reverse course quietly once a ceasefire is in place. They look for ways to make those investments durable. The policy architecture, accelerated by Hormuz, is becoming the new baseline.
The diplomatic dimension was equally significant. Conversations with Singapore, Japan, South Korea and others that began as exercises in keeping fuel moving have acquired momentum that won’t stop simply because tankers are moving again.
Critically, those conversations were possible because strong bilateral relationships already existed – built through years of trade agreements, diplomatic engagement and commercial presence in the region. Australia used its LNG and critical minerals position as leverage to negotiate priority access and procurement arrangements. Australia issued a joint statement with South Korea on 30 April and signed energy resource security argument with Japan on 3 May – formalising what had begun as emergency conversations into longer-term bilateral arrangements.
Prime Minister Albanese’s visit to Singapore at the height of the disruption reflected a deliberate decision to directly engage with Australia’s most significant financial and commercial hub in Southeast Asia. The visit produced a legally binding Protocol to the Singapore-Australia Free Trade Agreement on Economic Resilience and Essential Supplies, and established a new bilateral economic resilience dialogue – concrete outcomes that illustrate how diplomatic relationships, properly cultivated, translate into actionable frameworks for business.
Austrade’s Trade Resilience Service, set up in April, reflected a government increasingly focused on how firms at the end of the supply chain, exporters least equipped to absorb shocks, would respond under pressure. The decision to direct practical intelligence to smaller exporters was a signal that Canberra’s understanding of its responsibilities in a commercial disruption has shifted.
Responses across Asia
The region's response to the disruption varied considerably. Countries with deep institutional frameworks and established bilateral relationships were able to move quickly; those without them were slower to stabilise.
Singapore's response was in a category of its own. As Australia's largest supplier of refined petroleum products and its largest two-way trade and investment partner in Southeast Asia, Singapore was operationally central to Australia's response. Shipping was rerouted through Singapore's port infrastructure, marine insurance was arranged through its financial markets, and Australia’s long-standing bilateral relationship provided the platform for the agreements that followed.
China's position during the disruption deserves separate mention. As the world's largest importer of Gulf crude and Australia's largest trading partner, China's response had direct consequences for Australian businesses - in commodity pricing, in shipping availability and in the pace at which bilateral commercial activity normalised.
Elsewhere across the region, Japan and South Korea drew on their own institutional depth: Japan releasing strategic reserves while securing priority access with Gulf producers, South Korea activating IEA mechanisms while signing a rapid cargo-swap arrangement with Japan's JERA. Australia formalised new bilateral frameworks with both: a joint statement with South Korea on 30 April and energy resource security agreements with Japan on 3 May. India took a different path, expanding purchases of discounted Russian crude, a reminder that diversification of response, not just supply, is now a regional feature.
Each country ended the disruption with a more actively managed energy position than it had in February. None shows signs of reversing course.
In practice: how exporters responded
In several sectors, the strategic response was immediate.
Australian beef exporters, faced with the withdrawal of marine insurance and the practical difficulty of servicing Middle Eastern customers, redirected high-value shipments into North Asia, the United States and Europe. That reflected both the flexibility of premium product lines and the existence of market relationships that could be activated quickly. Government support assisted that behaviour.
For some exporters, the disruption forced decisions that might otherwise have taken years to make – not a shift away from existing markets, but a more active management of where product could move under market stress.
For some exporters, the disruption forced decisions that might otherwise have taken years to make – not a shift away from existing markets, but a more active management of where product could move under stress.
The recalibration was already under way
This disruption has not created new vulnerabilities. Rather, it has made the cost of existing ones visible, and accelerated a recalibration that has been under way since the pandemic.
Governments across the region have, for some time, been moving away from the assumption that economic interdependence takes care of itself. Growth and efficiency as the organising principles of a supply chain have been losing credibility. This disruption tested that model under live conditions (with consequences people could measure on a petrol station receipt) and gave political cover for reforms and policy changes that were already overdue. Economic security, critical minerals policy, investment screening, technology controls: these are different expressions of the same underlying calculation. Governments are building redundancy into systems they previously left to markets, and they are doing so explicitly.
Hormuz is not the only critical passage that matters. Submarine cables are vital components of global digital connectivity. Recent incidents of damage - ranging from accidental anchor strikes to cases investigated as possible sabotage - have drawn attention to their vulnerability. Major global chokepoints, including the Red Sea and the Baltic Sea, have experienced multiple cable disruptions, affecting the capacity and routing of international internet traffic.
Digital and financial infrastructure carries systemic dependencies just as binding as physical supply routes. The Reserve Bank of Australia said as much explicitly in a speech by Assistant Governor Brad Jones on 17 June: that the financial system sits downstream of an international order that is fragmenting, and that this is now a risk Australia’s own institutions must plan for.
For boards, the implication is direct. Geopolitical risk no longer sits upstream of financial and commercial arrangements; it runs through them. For Australian companies with significant Asia exposure, that means the risk calculus extends well beyond shipping lanes.
The punchline is this: it is in our collective interest to prepare for a financial system that is more shock-prone in the future. - Brad Jones, Assistant Governor (Financial System), Reserve Bank of Australia, June 2026
In practice: when contracts met crisis
A similar shift was visible in the handling of live contracts.
Exporters with product already on the water were managing not only logistics disruption but also contractual exposure as cargo was diverted or delayed. Engagement with government and counterparties moved quickly from information-seeking to clarification – on documentation, insurance recoverability and force majeure. Many matters were resolved commercially, increasingly they sat within a framework shaped by government intervention.
Across the region, what this period accelerated was a trend we had already been tracking in cross-border investment work: governments using crisis conditions to expand what they define as legitimate grounds for intervention. The broadening of national interest definitions (in investment screening, in export controls, in the designation of strategic sectors) did not begin with the Hormuz disruption. But it moved further and faster under pressure than most businesses had planned for.
A well-positioned economy – for those ready to use it
Australia’s standing as a stable, rules-based investment destination held up through this period, in part because the groundwork had already been laid. The Future Made in Australia agenda, the National Fuel Security Plan, and a well-established framework of bilateral and regional trade agreements across the Indo-Pacific and into the Middle East and Europe - including ChAFTA, SAFTA, IA-CEPA, KAFTA, RCEP, CPTPP and the ASEAN-Australia FTA, as well as the newer Australia–UAE CEPA and the Australia–EU FTA - create real market access and procurement pathways. They reflect a deliberate approach: an economy designed to function under stress, not only in stable conditions.
That pre-existing architecture gave Australia the standing and the established channels to engage regional partners quickly when the disruption hit. Those agreements serve not only as important trade instruments but a key part of Australia’s diplomatic infrastructure in the region.
For business, that approach translated into something practical. Australian companies operating across the region found that government-to-government relationships were more active and more useful than the previous period had allowed; they provided access, preferential treatment and practical problem-solving in logistics, financing and regulatory navigation. For businesses that had built on those relationships, positioning translated into options. For those that hadn’t, it remained context.
The Asia capability gap that became visible
The disruption did not create the Asia capability gap so much as expose it, testing under pressure what had previously been taken on trust. Regional knowledge, relationships, presence (attributes often described in general terms) were tested under conditions where time, not intention, determined the outcome.
The gap was a difference in degree, not kind. Organisations with established capability worked within the disruption. Others faced the same constraints with fewer options and longer timelines. The difference lay in what had already been built.
Asia capability is not something you assemble in the middle of a disruption. It shows up in the relationships you already have, the judgement your teams can exercise locally, and how well your business understands the markets it operates in. Where that capability was in place, firms were able to adapt quickly. Where it wasn’t, the issue was not identifying options, but the time it took to make them usable. - David Olsson, International Director, Mallesons
Three factors in particular distinguished organisations that managed the disruption from those that didn’t. None of them were primarily about crisis management.
Counterparty relationships that could carry a difficult conversation. When freight arrangements collapsed or pricing mechanisms needed to be renegotiated at short notice, the organisations that managed this quickly were ones that had invested in relationships rather than purely transactional arrangements. The difference between a commercial relationship and a trusted one showed up in hours, not weeks.
Regulatory literacy, not just compliance. Across Asia, the regulatory response to the disruption was fast-moving and, in some jurisdictions, improvised. Businesses with genuine in-market regulatory literacy were able to navigate it. Those operating at a distance found the information lag was itself a cost.
Supply chain exposure that had already been mapped. Organisations that had identified their critical dependencies on physical and financial supply routes were better placed to act when those routes were disrupted. For others, the first response was discovery rather than decision.
In practice: how preparation mattered more than proximity
Asia capability was less about geography than about preparation.
One resources client with an established footprint across Southeast Asia was able to adjust procurement and shipping within days. Existing relationships made alternative routing viable without renegotiating contracts from scratch. What could have become a supply interruption was managed instead as a reprioritisation within an already diversified system.
The contrast was clear where that preparation was thinner. A more concentrated sourcing model left less room to move as freight tightened and insurance conditions shifted. Alternatives existed, but not in a form that could be activated quickly. Diversification on paper did not translate into operational flexibility under pressure.
When the regulator changed the terms
One of the most consequential developments for boards and GCs attracted little coverage outside the financial sector. On 17 June 2026 (the same day the ceasefire was being formalised in Versailles) APRA sent a letter to every bank, insurer and superannuation fund it regulates, setting out minimum expectations for readiness against geopolitical shocks across six areas: sanctions exposure, market closure scenarios, foreign interference, insider threats, crisis response protocols and board-level oversight. Those institutions collectively hold over $9 trillion in assets.
APRA’s own assessment found that 70 per cent of regulated entities now rank geopolitical risk as high or critical. The gap it identified was not awareness but practice: sanctions and market-closure scenarios absent from investment strategies; crisis drills too shallow to give boards meaningful assurance.
Today’s letter is a clear call to action – awareness is not enough. We need to see APRA-regulated entities integrate geopolitical risk into governance, risk management and crisis preparedness practices to strengthen their readiness for geopolitical shocks. - John Lonsdale, Chair, Australian Prudential Regulation Authority, June 2026
This has direct implications for businesses that are not themselves regulated by APRA. The lenders, insurers and super fund trustees who finance and underwrite Australian businesses are now being examined on their geopolitical readiness (including their assessment of the counterparties they are exposed to). Those institutions are not waiting for their next annual review cycle to ask those questions.
Geopolitical readiness is becoming a threshold that lenders, insurers and investors apply to the businesses they deal with. For many organisations, the first sign of this shift will be a question they haven’t been asked before.
That downstream pressure is arriving in an environment that has already changed structurally. For businesses with significant Asia exposure, APRA’s focus has particular relevance.
Relationships, financing structures and supply arrangements that run through jurisdictions at the centre of the current geopolitical tensions are precisely the kind of concentration risk the letter is designed to address. The institutions that lend to, insure and invest in Australian businesses are now being examined on how well they understand that exposure; boards should expect those questions to travel downstream.
The view ahead
The past four months has confirmed something that is easy to overlook in stable times, namely that the architecture of global trade is not fixed infrastructure. Arrangements that had been treated as stable (shipping lanes, supply chains, financing structures, bilateral relationships) turned out to be conditional on political circumstances that can shift overnight. The rules-based order has not disappeared, but governments are increasingly willing to use economic and legal tools as instruments of state policy rather than constraints on it.
Nowhere is this more visible than across the Indo-Pacific. The region that matters most to Australian business is also the one where relationships, local knowledge and a genuine understanding of how decisions are made across different governments, regulatory systems and commercial cultures are becoming the difference between organisations that have options and those that find out too late the cost of unpreparedness.
The organisations that had genuine Asia capability before the disruption (trusted counterparty relationships, in-market regulatory literacy, supply chains they had already mapped) had options when the Hormuz passage closed. Those that hadn’t done that work found themselves mapping their exposure at the same time that they needed to be responding to it. The gap, in most cases, came down to preparation rather than resources or intent.
The regulatory and policy environment that emerged from the disruption is not reverting. Organisations still calibrating their Asia operations to a pre-2026 baseline are doing so against a set of conditions that no longer exists. Asia capability is not a long-term investment that pays off eventually. It determines whether an organisation has options the next time a critical passage closes – or discovers it doesn’t when it matters most.
2026 is described in the trading rooms of Singapore as the ‘Year of FM’. Across the region, a significant volume of force majeure clauses have been activated - but most counterparties have reserved their rights to date rather than pursuing formal disputes. While many parties will be able to resolve these issues commercially, those with weaker relationships may find themselves with the poorer options of either taking the loss or commencing formal proceedings. - Amanda Lees, Head of International Arbitration, Mallesons
For most boards, the honest question this period has surfaced is not whether the organisation has Asia capability in some general sense, but whether the capability it has actually functions when under pressure. That question is worth asking now.
The practical question that follows from this analysis is where to start: which dependencies to examine first, which contractual positions to revisit, which governance processes need to change. Those questions are addressed in our separate board brief, intended for boards and GCs working through the specific implications for their organisations.
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