Asia braces for a second wave of energy shocks from the Iran war
Asia faces prolonged economic strain from the Iran war, with rising energy costs pushing 8.8 million into poverty and risking $299 billion in losses, as governments struggle to balance subsidies and fuel shortages. Countries like India, the Philippines, Thailand, and Vietnam are implementing emergency measures such as workweek cuts, travel restrictions, and subsidy adjustments to mitigate the crisis.
Asia’s initial defenses against energy shocks from the Iran war are failing, triggering a second wave of economic disruptions as the conflict in the Strait of Hormuz persists. Governments had planned for short-term disruptions, but with no end in sight, fuel prices have surged to $120 a barrel from an expected $70, forcing difficult choices between maintaining subsidies or raising costs for consumers. The economic toll is severe: the United Nations Development Program warns 8.8 million people could fall into poverty, and the Asia-Pacific region may face $299 billion in losses. Rising airfare, shipping rates, and utility bills are slowing growth, while vulnerable populations bear the brunt of the crisis. India redirected fuel supplies to cooking gas for 330 million households, straining fertilizer production and threatening food security as El Niño weakens rainfall. Prime Minister Narendra Modi urged citizens to reduce travel, work from home, and cut fertilizer use by half to conserve dollars and fuel. The Philippines shifted to a four-day workweek and introduced targeted subsidies, but businesses in Manila still face higher energy costs. Thailand abandoned its diesel price cap and slashed other spending to manage higher oil costs, while Vietnam suspended fuel taxes and cut flights due to jet fuel shortages, hurting tourism—a key sector contributing nearly 8% to its GDP. Analysts warn that governments must now decide between sustaining costly subsidies or risking public backlash by passing higher costs to consumers. The prolonged energy crisis is reshaping economies across Asia, with no clear resolution in sight.
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