War on oil: Asia faces energy crunch amid supply disruption
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- March 9, 2026
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Asia’s energy-importing economies are scrambling to contain the impact of a widening Middle East war that has upended oil and gas markets and is now battering ordinary buyers. Oil and gas markets have been rocked by disruption to supply out of the Arabian Gulf. Prices of both commodities have jumped as the US and Israel continue to strike Iran, and the Islamic Republic retaliates with missiles and drones across the Middle East. On Monday, oil prices topped $100 a barrel for the first time since 2022, when they spiked in the aftermath of Russia’s full-scale invasion of Ukraine. The Strait of Hormuz, which is in near-paralysis now, is a chokepoint for the bulk of oil exports from the Gulf. Almost 90% of the crude and condensate transported through the waterway last year went to Asia. During an emergency meeting on Monday, South Korea’s President Lee Jae Myung became the latest to call for a swift cap on fuel prices. Taiwan, which also depends almost entirely on energy imports, has already set a weekly limit on oil-price increases, while Japan’s prime minister has said the country is examining measures to ensure gasoline prices do not exceed acceptable levels. South Asia’s price-sensitive buyers are among the worst hit. At least one province in Pakistan has curbed civil servants’ travel and the government has directed officials to draw up an austerity and savings plan within 48 hours. India has benefited from a US waiver providing access to Russian crude, but has struggled to alleviate pressure in liquefied petroleum gas, used for cooking, and liquefied natural gas, used from power production to manufacturing. The historic energy crunch has left some countries, including South Korea, to consider the option of drawing on petroleum reserves. Japanese refiners have also asked for such a measure. Group of Seven nations are preparing scenarios for the release of emergency oil stockpiles. Such co-ordinated drawdowns are rare, though there were two in the immediate aftermath of Russia’s invasion of Ukraine. Asia’s governments will have to stretch their budgets or risk unleashing an inflation shock as the deepening conflict in the Middle East pushes oil prices past $100 a barrel. That could raise new credit risks for emerging markets, warned Fitch Ratings, as higher oil prices bloat subsidy and import bills and disrupt remittances, tourism and investment flows. It tagged India and the Philippines as among the most at risk, with net fossil fuel imports exceeding 3% of their gross domestic product. According to Fitch, the strain is most acute in countries with thin financing buffers or wide current account deficits, such as Pakistan, and in economies that subsidise fuel. Tourism and remittance flows from the Gulf — a critical source of foreign inflows for South Asia — also face disruption risks. Surging oil prices following the Iran war are expected to impact China less than in past years as the country has built large crude stockpiles and diversified its energy sources, including renewables. Oil tumbled yesterday after US President Donald Trump said the Iran war will end soon, while the conflict continues to disrupt crude production and refining in the Middle East. Still, prices remain up by more than 50% this year as fears a conflict would hinder supplies from the Middle East increasingly materialise. A sustained increase in energy costs could trigger a surge in inflation and squeeze economic growth, raising fears of stagflation. International Monetary Fund Managing Director Kristalina Georgieva said on Monday a 10% rise in oil prices, if persistent through most of the year, would result in a 40-basis-point increase in global inflation. An inflation shock triggered by the US-Israel attack on Iran could wreck a fragile global economic recovery that had been expected to gain momentum this year.
