Iran war energy shock threatens Southeast Asia’s supply chains. A win for China?

Geopolitical instability from the US-Israeli war in Iran is triggering a significant recalibration of global supply chains, with energy-market volatility posing a direct threat to Southeast Asia's manufacturing base. This uncertainty is prompting Western buyers to reassess their "China Plus One" diversification strategies. Early signals from the Canton Fair—a key bellwether for China's exports—show a marked shift: over 210,000 overseas buyers preregistered, a 20% year-on-year increase, with European and American attendance recovering strongly. Exhibitors report a palpable return of inquiries, particularly for home appliances, new energy products, and consumer electronics, as importers prioritize stability.

Chinese exporters are capitalizing on this trend. Liang Qiuyan of Zhixin Electronics noted a clear return of European and US clients reinforcing their reliance on Chinese supply chains, expecting 30-40% revenue growth in 2026 driven by these markets. The fair itself spans a record 1.55 million square meters with 32,000 companies, underscoring the scale of China's export machine. While Southeast Asia gained capacity in recent years as firms diversified away from China, the region now faces production risks from energy supply uncertainty. This dynamic is leading some Western buyers to move orders back to China, suggesting that current US tariffs have had a limited impact compared to the pressing need for supply chain security.