SVA is monitoring developments in the context of the joint US and Israeli military operation against Iran.

Below is an initial assessment of the implications from an Asian perspective, for both our regional and international client base.

SVA will continue to issue updates as events move forward.

Regional impact

The Iran war is liable to affect regional security in Asia.

The war may result, at least for a time, in a diversion of US military resource towards the Middle East, at the expense of any tilt towards Asia. Indeed, some 40% of US Navy vessels ready for operations are reportedly around the Middle East, and the US is likely to have shifted over comparable intelligence and satellite capabilities, too.

That tilt is striking. Previously, US involvement in the Middle East impeded the Obama administration’s ability to shift focus onto Asia in the 2010s, and it is perfectly possible that the current crisis will have comparable consequences. Such considerations could impact the US alliance structure in Asia, especially given tensions between the US and partners such as South Korea.

China, and US allies such as Japan, South Korea and Australia, will watch the conflict closely, conscious that the war will run down US missile interceptor stocks. Such depletion is of concern in the context of a strong demand for these weapons not only from the Gulf, but also across Asia – even as industrial weaknesses in the US limit replacement (exemplified by shortages of skilled welders, amongst other issues).

The Iran war has also made clear how vulnerable Asia’s manufacturing economies are to shortages of energy products and inventory, and has underlined the risks of conflict to key infrastructure such as refineries, power generation, ports, cyber-optic cables, shipping, aviation, and communications hubs. Businesses across the region should take note.

China

The Iran war comes at a sensitive political moment in China. The Twin Meetings of Chinese legislatures, or “lianghui”, started this week, at which the Chinese Communist Party (“CCP”) will set out a new Five-Year Plan emphasising self-sufficiency, resilience and security.

Moreover, the meetings come in the wake of an apparent purge of senior military personnel in the People’s Liberation Army (“PLA”). The impact on military readiness is unclear.

The Iran conflict will strengthen perceptions in Beijing that the US is intent on containing China, adding to tensions over: Taiwan; trade; US action in Venezuela; Russia’s war in Ukraine; and Panama’s removal of port leases from CK Hutchinson, amongst other contentious issues.

The Iran conflict amounts to a blow to China’s “westward march”, by weakening efforts by Beijing to exert control over trade routes between Europe, the Middle East, and East Asia. However, it is also worth noting that Beijing maintains good relations with other parties, such as Saudi Arabia and Israel – and so will retain a regional presence.

Of further importance will be the loss of oil supplies from Iran (perhaps 13% of total imports). Such shortages could last for a time, especially if facilities such as the Kharg Island crude oil export terminal suffers damage. Supplies of other inputs such as methanol (crucial for chemicals manufacture) are also at risk, and damage by Iran to Saudi and Qatari facilities means both oil and LNG prices will rise rapidly.

That said, China has prepared for such an energy shock, owing to fear of a US blockade (“the Malacca Dilemma”). Beijing has scaled down reliance on oil imports through the Strait of Hormuz to about 40%, turning more to Russia; has built up reserves, to cover perhaps 90 to 120 days of requirements; and has developed domestic coal-based chemical and electricity generation facilities (the latter geared towards electric vehicles).

China will face second-degree challenges, too. A sudden rise in energy prices could slow not only its own economy, but also those in Europe, thus weakening demand for Chinese products – even as tensions over imports were rising. Of course, that does not mean that the Chinese government is likely to depart from its emphasis on high-technology industries, and on exports.

China’s efforts to expand use of the yuan in international trade have also received a blow. Much trade with Iran was denominated in CNY, and operated through Chinese payment systems or a barter arrangement, so as to circumvent US sanctions. This approach allowed for Chinese “teapot” refineries to provide oil to the domestic market.

Again, though, China had already taken steps to establish trade finance and payment systems that operate outside US control, and will likely double down on such initiatives, including with Russia.

Its state-owned enterprises may prove able to handle the risks, too, and China could bolster domestic shipping insurance mechanisms, such as the China P&I Club. Insecurity in the Gulf states may even benefit Hong Kong (and Singapore), as offshore financial centres. Also associated flight disruptions damaged Silver and Gold shipments from Dubai, which, looking forward Hong Kong could attend to.

A key event will be the upcoming summit between Trump and Xi, scheduled for 31 March 2026, which practically is more important to President Trump than to CCP General Secretary Xi. The two leaders could yet postpone this summit, if not cancel, although the diplomatic apparatus has invested much effort, and will want to see the meeting happen. Trump has much more invested in the meeting, whilst the PRC are more cautious. The recent silence over Taiwan has been deafening from the US camp.

Japan

Japan is very heavily exposed to rising energy prices. Some 90% of Japanese oil imports come from the Middle East, and its LNG reserves reportedly cover only three weeks. As such, an extended energy price rise would seriously damage its economy.

Military planners will also watch closely. The widespread use of missile strikes by Iran has highlighted how US bases on Japanese territory, such as those in Yokohama and Okinawa, as well as Japanese infrastructure, might come under attack in the event of an all-out conflict in the Taiwan Strait. As such, the Iran war is most likely to bolster the security orientation of the government of Prime Minister Takaichi.

Tokyo still faces a dilemma, though. The Japanese economy remains extremely reliant on China. Investment into China by Japanese businesses actually rose by 55% in the first three quarters of 2025.

This linkage speaks to a Chinese strategy of “targeted openness”, which seeks to bring outside capital into key sectors, so as to gain leverage; hence, Chinese measures in February 2026 to curtail exports of dual use goods to 40 major Japanese companies.

Quite how Tokyo will square this circle is not yet clear.

Taiwan

The Iran war also has implications for Taiwan, not least as the island is extremely reliant on energy imports.

China will assess the impact of the US-Israeli decapitation strike on Iran, in the context of possible application of such a scheme against Taiwan. Beijing will watch for success; but the lessons of Iran may yet be that killing leaders does not automatically guarantee regime change

Of further note is that US-Israeli actions in Iran have relied on deep intelligence initiatives, effectively integrated into military operations. The Iran war thus draws attention to Chinese intelligence activities in Taiwan, and how Beijing’s support for Pakistan in its war against India in May 2025 demonstrated an ability to integrate signals intelligence into operations. Taiwan is certainly not well positioned in this respect.

In this context, the planned meeting between Trump and Xi will again be of importance. The US has already postponed a decision on the sales of USD13 billion in arms to Taiwan, in order to facilitate a cordial meeting, and is hoping for a trade deal. Events in the Gulf will clearly play into discussions.

SVA continues to monitor developments, and will provide further updates as matters progress.

SVA

SVA (www.stevevickersassociates.com) is a specialist risk mitigation, corporate intelligence and risk consulting company. The firm serves financial institutions, private equity funds, corporations, high net-worth individuals and insurance companies and underwriters around the world.

We can be of assistance to your organisation in dealing with these complicated issues. If you wish to protect your business from the negative consequences of geopolitical risks, please do not hesitate to contact us.