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The Iran war has turned the Indian Ocean into a volatile new strategic theatre. Australia is well placed to shape its post-war order, but only if it updates strategic guidance, reinvigorates regional institutions, and deepens ties with Japan, India, and France.
How great power rivalry returned to the Indian Ocean and the stakes for Australia
About the author
Alexander Lee
Dr Alexander Lee is a Visiting Fellow at the Strategic and Defence Studies Centre at the Australian National University, where he researches Australian strategic policy and is currently leading a Strategic Policy Division grant on Indian Ocean security.
For decades, Australia’s strategic policy has focused on the Pacific and Southeast Asia — a natural orientation given its geography and the historic absence of threats from the Indian Ocean. However, great power competition has now returned to the Ocean’s littoral states. The Iran war has closed the Strait of Hormuz, and the resulting disruption to global trade routes is affecting Australian economic security and the credibility of its main ally in real time. Unlike the latent threat of conflict in the Western Pacific, the consequences of the Iran war are immediate and measurable. Yet Australia’s strategic guidance still treats the Indian Ocean as secondary and the Northwestern Indian Ocean as beyond the scope of its engagement.
This Policy Brief makes three interlocking recommendations that recognise Australia’s limitations and prioritise what is realistic in a deteriorating security environment. First, Australia should update its strategic policy to include the Northwestern Indian Ocean as an area for Defence engagement, opening greater collaboration with littoral states. Second, it should use the opportunities created by the Iran war and Red Sea crisis to reinvigorate the institutions that exist to engage with Indian Ocean partners. Third, it should deepen cooperation with friendly states active in the region, such as Japan, India, and France — the three powers best placed to work with Australia on preserving a stable and open Indian Ocean before Beijing fills the vacuum left by a distracted United States.
The Indian Ocean has historically been a secondary concern for Australia, behind the Pacific — despite the reality that Australia is a heavyweight in the Indian Ocean as one of the five G20 states that border the Ocean. Australia has the largest exclusive economic zone (EEZ) of any Indian Ocean state. However, the powerful British presence in the Indian Ocean from pre-Federation to 1971 allowed Australia to rely on London to maintain stability in the region.
This presence was unchallenged for much of the early 20th century to the extent that the Indian Ocean was perceived as a “British Lake”. British dominance was only threatened briefly by the Japanese in 1942 and it was decolonisation, rather than external threats, that led to the Royal Navy’s gradual departure in the decades after the Second World War. The British withdrawal barely changed Australia’s strategic focus at all; the Royal Navy’s friendly presence was simply replaced by another ally, the United States.
American dominance of the Indian Ocean was robust during the remainder of the Cold War, despite Soviet interests in the region growing in the 1970s and 1980s. In a 2009 interview, Kim Beazley — defence minister from 1984 to 1990, who worked to raise the profile of the Indian Ocean in Australia’s strategic imagination — noted that during the Cold War it was “a sideline in superpower competition, a backwater”.
The notion of the Indian Ocean as a relatively secure theatre has been reflected in Australian Defence white papers, which have looked to Australia’s North and East as the most likely areas from which a threat would emerge. For example, the post-Cold War 1994 Defence White Paper scarcely mentioned the Indian Ocean and saw developments in Asia and the Pacific as most relevant to Australian security.
Even when Australia has deployed forces to the region, as it did during the global war on terrorism, its presence in the Middle East was framed primarily as alliance support for the United States, rather than as advancing its own interests in the Indian Ocean.
Strategic guidance papers began to consider the Indian Ocean more seriously in the 2010s, with the 2013 Defence White Paper introducing the Indo-Pacific concept into the Australian strategic policy lexicon, reinforced by the 2016 Defence White Paper. However, these white papers defined the Indo-Pacific as only encompassing the Northeastern Indian Ocean, and their emphasis remained on the Pacific.
In recent history, the 2024 National Defence Strategy gave the Indian Ocean only limited consideration. It recorded that “Defence must focus its international engagement on maintaining regional stability in the Pacific, Southeast Asia and the Northeast Indian Ocean.” This was reinforced in the 2026 National Defence Strategy, which preserved the same language but added the need to build collective maritime domain awareness. Confining Australian engagement to the Northeastern Indian Ocean reflects the constraints Australia faces as a middle power. These stem from its vast terrestrial and maritime territories and the reality that the security situation in other consequential theatres, such as Southeast Asia, East Asia, and the Pacific, is deteriorating. Yet recent events in the Red Sea and Persian Gulf demonstrate that the Northern Indian Ocean intimately affects Australian economic security.
The Indian Ocean is an artery of the global economy. The rise of China and other Asian countries since the late 1970s has shifted the global economic balance of power towards the Indian Ocean region — the vital conduit for trade between Europe, the Middle East, and Asia. This is especially true of the Northern Indian Ocean.
Unlike trade across the more open Pacific or Atlantic, Indian Ocean trade is concentrated through the chokepoints of the Strait of Hormuz, Bab-el-Mandeb, Suez Canal, and Strait of Malacca. The Carnegie Endowment for International Peace recorded in 2023 that more than one-third of the world’s bulk cargo and two-thirds of its oil shipments transit the Indian Ocean. In terms of crude oil and petroleum liquids, the US Energy Information Administration recorded in the first half of 2025 that the Strait of Malacca and the Strait of Hormuz each transited more than 20 million barrels per day, making them by far the most globally strategic chokepoints.
The scale of East-West trade across the Indian Ocean is only accelerating. Between 2014 and 2024, the European Union’s goods imports from China rose 102 per cent, and its exports 47 per cent. New economic relationships are being forged in the Indian Ocean in response to conflicts elsewhere. European economies, for example, are turning to the Gulf states for energy as they reduce their reliance on Russian fuels. Whether these plans survive current conflicts remains to be seen.
The Indian Ocean’s role as a global trade conduit could expand further with improvements to governance and infrastructure, issues that currently limit economic growth and foreign direct investment. African ports that could benefit from commercial vessels transiting the Cape of Good Hope, for instance, have struggled to manage the additional maritime traffic.
Beyond shipping lanes, the states adjacent to the Indian Ocean are rapidly gaining economic weight as the region becomes wealthier. In addition to Australia, the G20 economies of South Africa, Saudi Arabia, Indonesia, and India are deeply linked to the region, as are the quickly growing Gulf Cooperation Council (GCC) members, which together constitute a Brazil-sized economy. India, the largest Indian Ocean economy, surpassed Japan’s GDP in 2025 and is forecast to surpass Germany’s by the late 2020s. Even historically underdeveloped parts of the littoral, such as East Africa, have recently become the continent’s fastest-growing sub-region, driven by better infrastructure and governance. Future growth potential remains high, underpinned by the young populations of many regional economies.
Yet the Indian Ocean’s economic potential is constrained by non-traditional security threats. The Ocean is warming faster than any other, increasing the frequency of climate shocks and undermining the long-term sustainability of fisheries already strained by illegal, unregulated, and unreported fishing. These pressures disproportionately affect the smaller island economies of the Southwestern Indian Ocean. Overcoming these challenges will accelerate the economy of the Indian Ocean.
China has been gradually increasing its presence in the Indian Ocean, as have Australia’s Quadrilateral Security Dialogue (Quad) partners Japan and India. The United States, although deeply involved, has given the region a lower strategic priority than other sub-regions in the Indo-Pacific in the past few years. These great powers have been simultaneously increasing their military and economic presence in the region while strengthening ties and cooperation with Indian Ocean littoral states.
Although the Indian Ocean is only a secondary maritime theatre for Beijing, China has become a dominant player there. It relies on the Ocean’s sea lines for vital imports, has deep trade relations with every littoral state, and maintains a widespread maritime presence. Its intentions in the region remain ambiguous, but it holds significant leverage over many of the Indian Ocean states. Since 2008, it has deployed warships to the Gulf of Aden to counter piracy, and in 2017 it built its first overseas military base, in Djibouti, to support those operations. That base has since become the centre of China’s Indian Ocean activity and anchors a continuous military presence in the Western Indian Ocean. It has also invested heavily in ports in Pakistan, Egypt, Sri Lanka, Malaysia, the United Arab Emirates, and Singapore.
Partly to balance Beijing, Tokyo has likewise demonstrated increased interest in the Indian Ocean. It maintains a long-term security base in Djibouti to counter piracy, and approximately half of Japanese official development assistance goes to Indian Ocean states. Japan has cooperated with France and India to restructure Sri Lankan debt and committed more than US$400 million to the Madagascan Port of Toamasina expansion project through the Japan International Cooperation Agency.
India, the eponym of the Ocean, is a growing presence in the region beyond its coastlines. Its 2025 Mutual and Holistic Advancement for Security and Growth Across Regions (MAHASAGAR) doctrine articulates India’s economic and security ambitions. It signals the country’s willingness to counter Chinese influence beyond its surrounding territories. New Delhi has also secured access to facilities and built maritime-security partnerships across the Indian Ocean, including with Oman, Iran, the United Arab Emirates, Australia, Indonesia, Mauritius, Seychelles, and Madagascar. Yet India’s traditional role of counterbalancing Chinese influence in the region is in flux, with relations between New Delhi and Washington deteriorating since 2025.
Australia’s most powerful ally, the United States, is globally engaged but has not prioritised the Indian Ocean until recently. The Department of War’s January 2026 National Defense Strategy ranked the Western Hemisphere as the country’s primary focus, with a secondary focus on deterring China through “a strong denial defense along the First Island Chain” in the Pacific.
However, preparations for the joint US–Israeli strikes against Iran in February 2026 brought an unprecedented concentration of US assets to the Indian Ocean. The war triggered a cascade of Iranian reprisals across the Gulf and the closure of the Strait of Hormuz. Disruption to the global economy has been immense, and there remains little sign of a clear resolution.
The conflict has destabilised the balance of power in the region and beyond. The depletion of US weapons for its Iran operation has been felt in other theatres, with American arms sales to Taiwan, for example, now paused. The repercussions for Australia and its Asian partners have been severe, with public opinion of Washington in Southeast Asia souring as the economic and social costs of fuel shortages bite.
The unpredictability of the United States and the uncertain trajectory of the Iran war necessitate greater Australian attention to Indian Ocean security that can be scaled to the duration and severity of the ongoing crises. Current Australian strategic guidance aligns the primary area of military interest with the focus of Defence’s international engagement — both centred on the Pacific, Southeast Asia, and the Northeastern Indian Ocean. This Policy Brief recommends widening the focus of Defence’s international engagement to include more Indian Ocean-adjacent states.
The Northern Indian Ocean is a single, continuous maritime theatre. Although each sub-region faces unique challenges, the 2026 Iran war has shown that disruptions at the western edge of its trade corridors threaten Australian and regional economic security just as much as they would in the Northeastern Indian Ocean. Indeed, Australia has already de facto recognised this by aiding in the defence of the GCC states. Responding to a call for help from the Emirati government, Australia deployed an E-7A Wedgetail — an advanced early-warning aircraft — and 85 personnel to the Persian Gulf to intercept Iranian missiles.
Programs that specify a geographic limit, such as Indo-Pacific Endeavour — Australia’s flagship regional defence engagement activity, currently confined to Southeast Asia and the Northeastern Indian Ocean — would benefit from bringing in Northwestern Indian Ocean states. This would formalise existing relationships and connect these states to Australia’s security partner network. Indo-Pacific Endeavour offers Australian capabilities across areas such as maritime security, logistics planning, disaster relief, cultural exchange, and cyber resilience. Northwestern Indian Ocean states share Australia’s enduring interests in freedom of navigation and would stand to gain from greater access to Australian expertise. Updating strategic guidance to reflect this reality is a logical step that would make cooperation with Gulf states enduring rather than temporary. This is a modest change that avoids the strain of ongoing deployments while ensuring long-standing relationships are not neglected.
Australia has deep experience to offer Indian Ocean states and shared interests with its Indian Ocean neighbours. However, the region is institutionally disunited and in the midst of its greatest security upheaval since the Second World War. Pan-regional organisations such as the Indian Ocean Rim Association (IORA), for example, suffer from a low profile, structural under-resourcing, and a membership that includes some of the world’s poorest and most war-torn states such as Somalia and Yemen. It is also missing a number of the powerhouse regional states, including Saudi Arabia and Pakistan, and wealthy Gulf states Qatar, Kuwait, and Bahrain.
Exacerbating these problems is tension within the bloc itself: Iran, an IORA member, recently attacked fellow member the United Arab Emirates in response to joint US–Israeli strikes. While complicating the effective functioning of IORA, crises such as these also bring opportunity. IORA’s charter promotes trade, sustainable growth, investment, and economic cooperation, though how much can be achieved in the war’s wake remains to be seen. If IORA can increase its effectiveness in line with its Vision 2030 goals, Australia should work with like-minded members to push for freedom of navigation and to tackle shared threats such as illegal fishing and marine pollution, and to build disaster resilience.
However, given the considerable and growing problems faced by IORA, Australia should look to deprioritise engagement with it and seek alternatives. These include the Indian Ocean Commission (IOC) — a much smaller grouping of Comoros, Madagascar, Mauritius, France (Réunion), and Seychelles. The Commission acts in favour of security, especially food and maritime security, as well as international peace and stability.
The IOC has recently admitted China, India, Japan, and South Korea as observers. Japan has used this status to advance its “Free and Open Indo-Pacific” vision and to strengthen maritime security in the Western Indian Ocean. Australia should seek observer status to promote openness and is well placed to assist IOC states given the strong parallels between their climate and non-traditional security challenges and those of Australia’s Pacific neighbours.
Aside from working with international institutions and cooperating with the Northwestern Indian Ocean states, Australia should also deepen its collaboration with like-minded influential states, especially Japan, India, and France. A stronger Australian naval presence in the Indian Ocean, already guaranteed by massive investment in the HMAS Stirling naval base in Western Australia and plans for the basing of rotational forces there for AUKUS operations, will ensure Australia has a seat at the table of any regional contingency. The Quad grouping, by contrast, may be of limited value. It lacks cohesion due to a more unilateralist foreign policy from the United States, and its future is unclear. However, Canberra’s interests continue to align closely with Japan and India, as well as with France, each of which offers distinct but complementary value in the Indian Ocean.
Japan and Australia are well positioned to work in tandem on promoting freedom of navigation and mutual economic benefit in the Indian Ocean. Minister for Defence Richard Marles pronounced in April 2026: “I can’t think of another country in the world with which we are more strategically aligned than Japan.” Japan also offers Australia a way to increase its hard power in the region, as demonstrated by the recent purchase of frigates from Japan that will, over time, serve to build Western Australia’s defence industrial base. Cooperation on missiles and drone production with Tokyo and keeping up momentum with ever deeper defence industrial cooperation will benefit Australia regardless of political winds in the Indian Ocean region.
Beyond Japan, France and India have natural synergies with Australia. France’s bases in the Western Indian Ocean, India’s central position, and Australia’s in the east could extend all three countries’ coverage if they agreed to share facilities. This would aid maritime surveillance and be a strong signal of trilateral cooperation. Deepening bilateral ties with Paris and New Delhi, and reviving the dormant France–Australia–India trilateral when conditions allow, would be prudent while Indian Ocean security commands global attention. Pursuing greater cooperation with Japan, France, and India alongside stronger regional institutions and IOC observer status will position Australia to shape the post-Iran war Indian Ocean security architecture.
The Iran war has forced the Indian Ocean onto the world’s agenda. Disrupted trade routes, an unprecedented concentration of great power assets, and the fragility of existing institutions have created a moment of genuine strategic opportunity for Canberra. The three recommendations in this Brief — updating strategic guidance, reinvigorating regional institutions, and deepening cooperation with Japan, France, and India — are modest in cost and recognise that Canberra must keep devoting the bulk of its resources to the regions closest to home. Nonetheless, after a century of relying on others to secure the Indian Ocean, Australia now has the geography, the alliances, and the credibility to chart its own course.
