Asia is entering a tougher phase of the energy shock triggered by the Iran war, as early government steps—designed as temporary “triage” against disruptions to fuel flows—begin to fade and higher costs spread through household bills, food production and business operations. The initial disruptions forced countries to close the gap created by constrained supplies through rationing, subsidy changes and short-term stockpiling, but AP reports those adaptations were premised on a short conflict.
When the war started, governments scrambled to adjust to the closure of the Strait of Hormuz, a key route for energy flowing to Asia. They made trade-offs, including saving electricity at the risk of slowing businesses, prioritizing gas for households while cutting into fertilizer production, and dipping into energy stockpiles for short-term relief.
Those measures were expected to work only until energy flows could resume quickly. That has not happened, AP reported, and the fuel crisis is now rippling across economies—pushing up airfare costs, shipping rates and utility bills and threatening growth. The United Nations Development Programme said about 8.8 million people in danger of being pushed into poverty, and that the conflict may cause $299 billion in economic losses across the Asia-Pacific region.
In a separate challenge, many Asian governments planned their budgets around the assumption that oil would average about $70 a barrel, using subsidies to help keep fuel prices stable. As the war pushed Brent crude prices to as high as about $120 a barrel, those subsidies became more expensive, leaving leaders facing a choice between tightening public finances or cutting support and passing more of the costs to consumers—an approach some analysts warned could trigger backlash.
Samantha Gross of the Brookings Institution said the burden falls first on “the countries with the least resources to respond, or the consumers who can least afford to pay,” AP reported. Ahmad Rafdi Endut, a Kuala Lumpur-based independent energy analyst, said governments may choose between maintaining costly subsidies by cutting spending elsewhere or borrowing more and accepting higher inflation—or reducing subsidies and risking political anger. Endut warned that once subsidies are exhausted and inflation starts to rise, countries could face what he called a “fiscal time bomb.”
As the second wave begins, AP described how the impacts differ across countries and sectors. In India, redirecting fuel supplies toward cooking gas for about 330 million households has cut into supplies for fertilizer plants, while meteorologists have warned of weak rainfall during an El Niño year. That combination has raised concern for India’s fertilizer sector and is especially sensitive for the world’s largest rice exporter.
Prime Minister Narendra Modi urged Indians on Sunday to buy locally and cut down on travel abroad to save dollars, and he also encouraged work from home and use of public transport to reduce fuel consumption. AP also reported that Modi asked farmers to halve fertilizer use, while the shift toward cooking gas continued to squeeze fertilizer inputs.
Other countries made different adjustments to stretch energy supplies and protect consumers. The Philippines shifted to a four-day work week to save fuel and rolled out targeted subsidies for poorer households, but Fitch Ratings noted that most consumers were still paying higher energy costs and that business activity was slowing in major cities such as Manila. Thailand abandoned its diesel price cap less than a month after the conflict began as fuel subsidies ran out, and it moved to cut other spending to manage higher oil prices while keeping its budget under control.
In Vietnam, the government extended a suspension of fuel taxes to ease pressure on domestic prices. AP reported that jet fuel shortages had led to flight cuts, and said tourism accounts for nearly 8% of Vietnam’s gross domestic product, meaning disruptions affect the broader economy. A Hanoi-based tour guide, Nguyen Manh Thang, told AP: “Business is not good right now,” adding that “There are already fewer tourists.”
Analysts warned that shortages also alter import behavior for cash-strapped states. AP reported that countries such as Pakistan and Bangladesh, faced with tighter fuel supplies, have bought oil and gas at current market prices that can be higher and more volatile than long-term contract pricing. Those purchases raise import costs and add pressure on limited foreign-exchange reserves.
The shortages and the higher prices are not expected to fade quickly even if the war ends. Gross said the global oil and gas trade will not “bounce back right away,” and that restarting production, repairing damaged infrastructure and allowing transport time from the Middle East to final markets could take weeks or even months. Europe is expected to feel a similar impact, though with a roughly four-week lag, AP reported.
Southeast Asia, in particular, is described as a major pain point. Henning Gloystein of Eurasia Group said the region is currently the “biggest pain point,” and told AP, “This fuel shortage situation is going to get worse.” AP reported that energy and import costs are straining budgets elsewhere as well—widening deficits and driving up inflation in Africa—and that the war is taking a toll on Latin America and the Caribbean, where growth is projected to slow slightly.
The disruptions are also expected to continue to stress supply chains, AP reported, with Ted Krantz, CEO of Interos.ai, warning that complex disruptions across global supply chains will have broader impacts. Maria Monica Wihardja of the ISEAS-Yusof Ishak Institute said the crisis highlights the fragility of Asia’s growing middle class, with many people at risk of slipping back into poverty. She said the energy shock will reshape Southeast Asia’s economies over time, including shifts in job markets and how countries plan for future energy crises.
Beyond short-term triage, countries are already debating longer-term options, AP reported, including diversifying fossil-fuel suppliers and developing nuclear energy and renewables such as solar. Albert Park of the Asian Development Bank said the war has made geopolitical risk central to Southeast Asia’s economic outlook and is directly slowing regional growth, and he warned that “The longer it lasts, the larger those negative effects would be.”