Asia grapples with oil and fuel crisis as Strait of Hormuz blockade disrupts energy supplies
Governments across region cap prices, ration fuel, and impose working from home as Iran war triggers worst energy shock in decades
SINGAPORE — March 12, 2026 — Asian governments are scrambling to contain a deepening energy crisis triggered by the effective closure of the Strait of Hormuz, with countries from South Korea to Bangladesh imposing price caps, fuel rationing, and emergency working-from-home measures as oil prices remain volatile following the outbreak of war between Iran and the US-Israeli alliance on February 28 .
The crisis has cut off the world’s most important energy chokepoint, through which approximately 20 per cent of global oil production and a similar share of liquefied natural gas normally flow, with the vast majority destined for Asian markets . Brent crude surged above $119 per barrel on March 9 before retreating, but remains significantly elevated, forcing import-dependent economies to take unprecedented steps to protect consumers and maintain essential supplies .
Global markets steady after oil price plunge as Middle East conflict fuels volatility.
Price controls return to Asian markets
South Korea has announced the most direct intervention, with President Lee Jae Myung stating on March 9 that his government would “swiftly implement” a price cap on petrol products—the first such move in nearly 30 years since the 1997 Asian financial crisis . The measure, expected to operate on a two-week cycle adjusted for international prices, comes as South Korea sources more than 70 per cent of its crude from the Middle East, with approximately two-thirds of that passing through the Strait of Hormuz .
Lee described the crisis as creating a “significant burden” on the economy and warned oil companies against price manipulation, with violations carrying penalties of up to two years’ imprisonment or fines of 20 million won (approximately $13,500) .
Thailand’s Prime Minister Anutin Charnvirakul announced on March 4 a 15-day freeze on diesel prices at 29.94 baht (approximately $0.86) per litre, while urging citizens not to stockpile fuel after long queues formed at petrol stations nationwide . Vietnam has removed fuel import tariffs until the end of April, though domestic prices have already risen sharply, with diesel up nearly 57 per cent since late February .
India, while benefiting from continued access to Russian crude under US waivers, has instructed state-owned oil marketing companies to freeze retail petrol and diesel prices unless international prices exceed $130 per barrel, according to government sources cited on March 10 . The government has also extended liquefied petroleum gas ordering cycles from 21 to 25 days to prevent panic buying of cooking fuel .
Demand reduction and working-from-home measures
Several governments have focused on reducing consumption rather than controlling prices. Philippine President Ferdinand Marcos Jr announced on March 6 a four-day working week for most public offices, exempting only critical services such as fire stations and hospitals . Local governments have also implemented the measure, aiming to cut both fuel consumption and electricity demand .
Bangladesh has taken some of the most aggressive steps, closing universities from March 9 to save energy and introducing fuel rationing, according to state media . Four of the country’s five state-run fertiliser factories have suspended operations, with natural gas redirected to power generation . Authorities have not specified when universities will reopen, though officials indicated institutions may resume after the Eid holidays if the energy situation improves .
Pakistan, which imports approximately 80 per cent of its crude from Gulf suppliers, raised petrol prices by a record 55 rupees (approximately $0.38) per litre on March 9 . Prime Minister Shehbaz Sharif ordered increased work-from-home arrangements for office staff, school closures for two weeks from mid-March, and university classes shifted online to reduce commuting demand . Government department fuel subsidies have been cut by 50 per cent for two months, with 60 per cent of official vehicles ordered off roads except for public transport and ambulances .
Thailand has directed most government agencies to implement work-from-home arrangements, while Vietnam has called on businesses to encourage remote work and promote carpooling and cycling . Indonesia has pledged increased fuel subsidies, though economists warn that sustained high oil prices could significantly widen the budget deficits of countries that subsidise fuel .
Supply chain disruptions and industrial impact
The crisis has triggered disruptions throughout the energy supply chain. In Singapore, the world’s largest bunkering port, some fuel suppliers have notified customers they can only partially fulfil existing contracts due to falling inventories as upstream supplies tighten .
South Korean petrochemical company Yeochun NCC declared force majeure on some sales contracts on March 5 after naphtha feedstock supplies were disrupted, according to industry sources . In Japan, Mitsubishi Chemical began reducing operating rates at its Ibaraki prefecture ethylene plant on March 6, with a company spokesperson confirming on March 9 that the move aimed to prevent a complete shutdown amid uncertainty over Middle Eastern naphtha supplies . Japan imports approximately 60 per cent of its naphtha, with nearly 70 per cent of that originating from the Middle East .
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Indonesia’s largest petrochemical company, PT Chandra Asri Pacific, declared force majeure during the week of March 2, citing disrupted feedstock shipments from the Gulf . Analysts warn that similar declarations may follow elsewhere in the region, particularly in South Korea, as feedstock supplies tighten .
In India, the western state of Maharashtra has suspended gas-based crematorium services in Pune from March 10 after liquefied petroleum gas stocks were depleted, with municipal officials stating the facilities would remain closed until further notice from central government . While wood remains the traditional fuel for Hindu cremations, gas cremation had gained popularity in recent years as a cleaner alternative .
Auto manufacturers are also feeling the pressure. Maruti Suzuki India has begun inquiring with suppliers in Gujarat and around Delhi about contingency plans, including possible partial reversion to fuel oil, according to sources familiar with the discussions . Tata Motors is considering introducing propane and LPG as alternative fuels for ovens in its local paint shops, a move that would increase costs .
Strategic reserve considerations
Japan, which imports approximately 95 per cent of its crude from the Middle East and holds reserves sufficient for about 354 days of consumption, instructed oil storage operators on March 9 to prepare for possible reserve releases . Chief Cabinet Secretary Kenji Kobayashi clarified the same day that no final decision had been taken, but officials are preparing contingencies .
China has asked domestic refiners to halt diesel and gasoline exports and attempt to cancel previously committed shipments, according to reports from March 5 . The move reflects a broader regional trend of prioritising domestic supply over export markets as the crisis deepens.
However, analysts caution that strategic reserves cannot provide an immediate solution. “Releasing oil from storage is not always quick or easy,” noted market analyst Jun Gao, cited by Moneycontrol on March 10. “It takes time to move the oil to refineries and get it into the market” . Physical constraints, logistical bottlenecks, and facility limitations all create delivery lags .
Panic buying and consumer impact
Across the region, consumers have rushed to fill tanks amid fears of shortages and rising prices. In Vietnam, approximately 15 to 20 petrol stations have reported running out of fuel, with long queues forming at those still operating . Hoang Van Thang, a 29-year-old motorbike taxi driver in Hanoi, told Reuters he waited 30 minutes to fill his tank on March 9—six times longer than usual—and estimated his daily fuel costs had already risen by approximately 20 per cent over the past week .
In Thailand, Prime Minister Anutin issued a public appeal on March 8 urging citizens not to stockpile fuel, as supplies at some outlets had already run low . Australian Energy Minister Chris Bowen sought to reassure farmers and other diesel-dependent users on March 9, stating there was no supply problem but acknowledging “a significant surge in demand” .
The International Energy Agency’s data shows the Asia-Pacific region remained a net importer of crude oil, natural gas, and coal through 2023, leaving economies structurally exposed to external energy shocks . OCBC bank noted in a March 9 research report that Singapore, Thailand, South Korea, India, and Vietnam all import substantial shares of their petrol and gas from the Middle East .
Economic implications and outlook
OCBC outlined three scenarios for oil prices in its March 9 analysis. In a base case, Brent could fall below $70 per barrel by mid-2026. In a “moderately severe” scenario where energy flows partially resume under military escort, Brent could remain around $100 through mid-year. In an “acute” scenario involving prolonged halt, prices could surge to approximately $140 per barrel and remain elevated through mid-year .
Sustained high prices would likely weaken trade balances across Asia, with surpluses narrowing and deficits widening. Inflationary pressures would intensify, particularly in economies without retail fuel subsidies. The Philippines and India could see noticeably wider trade deficits alongside higher headline inflation compared with baseline forecasts .
For Indonesia and Malaysia, both expected to face wider fiscal deficits as governments absorb higher subsidy costs. The fiscal impact for China and the Philippines is expected to be more muted, while Thailand and Vietnam have cross-subsidy oil funds that could cushion near-term fiscal effects .
Latest developments
As of March 12, 2026, the Strait of Hormuz remains effectively closed to commercial shipping, with Iran vowing that “not one litre of oil would be exported from the Gulf” while hostilities continue . Gulf producers including Saudi Arabia, Iraq, the United Arab Emirates, and Kuwait have reduced output by an estimated 6.7 million barrels per day—approximately 6.5 per cent of global supply—as storage facilities fill up .
Iraq suspended operations at all oil ports on March 12 following attacks on two tankers in its territorial waters that killed one crew member, further tightening regional supplies . Kuwait Petroleum Corporation has declared force majeure on some shipments, while Qatar, the world’s second-largest LNG exporter, has suspended shipments entirely .
US Energy Secretary Chris Wright said on March 8 that oil and gas prices will fall when the US destroys Iran’s capability to strike tankers in the Strait of Hormuz . President Donald Trump stated on March 8 that a short-term jump in oil prices was a “small price to pay” for removing Iran’s nuclear threat .
Asia’s energy crisis, triggered by the effective closure of the Strait of Hormuz following the outbreak of war on February 28, has forced governments across the region to implement emergency measures unseen in decades. From South Korea’s first fuel price caps since 1997 to Bangladesh’s university closures and India’s suspension of gas cremations, the impact is being felt from factory floors to funeral pyres.
With the strait carrying approximately 20 per cent of global oil supplies, most of it destined for Asian markets, the region’s structural dependence on Middle Eastern energy has been laid bare. As countries scramble to cap prices, ration supplies, and reduce consumption, economists warn that the longer the crisis continues, the more severe the economic consequences will be—widening trade deficits, stoking inflation, and forcing central banks to maintain tight monetary policies that could stifle growth.
For now, Asian governments are fighting a holding action, drawing on strategic reserves, imposing administrative controls, and urging conservation, while hoping that diplomatic or military developments will soon reopen the world’s most important energy waterway. Until then, the region remains in the grip of its worst energy shock in decades, with no immediate end in sight.
Sources / Inputs
BBC News: Asia governments to cap fuel prices as oil costs jump
BERNAMA: Higher Oil Prices Pose Fiscal, Inflation Risks For Asia — OCBC
Vietnam News: Asia scrambles as oil surges 25% on Iran war fears
Understanding the Global Economy: GDP, Inflation, Trade & Monetary Policy.
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