Asia faces uneven impact of energy crisis as Iran war disrupts oil supplies

SINGAPORE, May 5 — Asia is facing a growing energy crisis as the Iran war disrupts oil supplies, pushing up costs and slowing economic growth across the region. Governments are increasing subsidies and cutting fuel taxes to shield consumers, but the impact is putting pressure on public finances.

The crisis matters for global markets as Asia accounts for the largest share of oil imports. Disruptions in the Strait of Hormuz have reduced supply flows, contributing to higher prices and inflation across several economies.

Oil imports fall as supply tightens

Asia’s oil imports dropped sharply in April, reflecting reduced shipments from the Gulf due to ongoing tensions. The Asian Development Bank has lowered growth forecasts for developing Asia while raising inflation projections, highlighting the broader economic impact.

Governments respond with subsidies

Countries across the region are using subsidies, tax cuts, and controls on fuel use to manage the immediate shock. These measures are helping limit price increases but are adding strain to government budgets.

Uneven impact across regions

The impact varies widely. China has relied on reserves and diversified energy sources, while Japan has increased imports from alternative suppliers and released strategic stockpiles.

In Southeast Asia, countries are adjusting supply strategies, including limiting exports and boosting domestic production.

South Asia faces higher risks

South Asian economies, including Pakistan, Bangladesh, and Sri Lanka, are among the most exposed due to limited financial buffers. Rising energy import costs are increasing fiscal pressure and affecting economic stability.

Pakistan has recently moved to secure additional liquefied natural gas supplies at higher prices, reflecting tighter availability in global markets.

Currency and inflation pressures

Higher energy costs are also weakening regional currencies and pushing up inflation. Analysts say the long-term impact will depend on how long disruptions continue and how effectively governments manage supply and demand.

Also read: Oil prices surge above $100 amid U.S. blockade on Iran