Global governments are scrambling to mitigate the economic fallout from the escalating conflict in Iran, which fuelled a record surge in oil prices on Monday. This surge followed output cuts by key producers and signals from Tehran that hardline elements will remain in charge.
Reflecting mounting international concern over supply disruptions, Group of Seven finance ministers are scheduled to discuss a potential joint release of emergency oil reserves during a meeting on Monday, a French government source confirmed.
In South Korea, which imports 70% of its oil from the Middle East, President Lee Jae Myung announced Seoul would cap fuel prices for the first time in nearly 30 years, while cautioning against panic buying.
Speaking at an emergency meeting, Lee called the crisis “a significant burden on our economy, which is highly dependent on global trade and energy imports from the Middle East.”
A senior Japanese member of Parliament on Sunday said the government had instructed a national oil reserve storage site to prepare for a possible crude release, although the country’s chief cabinet secretary later saidno decision had been made to release stockpiles.
Japan imports around 95% of its oil from the Middle East. It has reserves to cover 354 days of consumption.
Elsewhere, Vietnam removed import tariffs on fuels and Bangladesh shut universities to conserve electricity and fuel, while China last week asked refiners to halt fuel exports and try to cancel shipments that were already committed.
Trump plays down prices
President Donald Trump tried to downplay concerns about rising U.S. gasoline prices, which were up 11% for the week on Friday, while Senate Minority Leader Chuck Schumer called on him to sell oil from the Strategic Petroleum Reserve.
“Short term oil prices, which will drop rapidly when the destruction of the Iran nuclear threat is over, is a very small price to pay for U.S.A., and World, Safety and Peace,” Trump posted on Truth Social on Sunday night. “ONLY FOOLS WOULD THINK DIFFERENTLY!”
Oil jumped 25%, with Brent on track for a record one-day gain, while OPEC producers Kuwait and Iraq cut output over the weekend as the crucial Strait of Hormuz remained effectively shut.
Brent jumps 25%
Across Asia, which sources 60% of its oil from the Middle East, equities slid and the dollar rose as worries grew that the disruption in energy supplies could be prolonged.
Iran on Monday named Mojtaba Khamenei to succeed his father Ali Khamenei as supreme leader, a move that is expected to draw Trump’s ire. Weekend attacks on Iranian oil storage facilities fuelled fears of retaliatory strikes on energy facilities.
In Bahrain, Bapco Energies declared force majeure on Monday following an attack on its refinery complex, the company said.
“Oil prices have now gathered all the ingredients for a perfect storm – Middle East Gulf producers cutting output, the prolonged closure of the Strait of Hormuz … all compounded by a growing pessimism about a quick turnaround in the current situation,” said Kpler senior oil analyst Muyu Xu.
Iraq cut oil production at its main southern oilfields by 70% to 1.3 million barrels per day, three industry sources said on Sunday, while Kuwait Petroleum Corp began cutting oil output on Saturday and declared force majeure.
No. 2 LNG exporter Qatar has already halted exports of the superchilled fuel and analysts predict that the United Arab Emirates and Saudi Arabia will also have to cut output soon as they run out of oil storage due to the Strait of Hormuz closure.
How governments are taking or plan to take to reduce the impact of the war on their economies:
South Korea
South Korean President Lee Jae Myung said on Monday that authorities would cap domestic fuel prices for the first time in nearly 30 years. The country will also look for sources of energy beyond supplies shipped via the Strait of Hormuz, and a 100 trillion won ($67 billion) market-stabilisation programme should be expanded if needed, he added.
Japan
The Japanese government instructed a national oil reserve storage site to prepare for a possible release of crude, Akira Nagatsuma, a member of the Centrist Reform Alliance opposition party, told Reuters on Sunday.
Details such as the timing of the release remain unclear, Nagatsuma said.
Vietnam
Vietnam is planning to remove import tariffs on fuels to ensure supplies amid disruptions, the government said, adding that the measure is expected to last until the end of April.
Indonesia
Indonesia will increase the amount it has allocated for fuel subsidies in its state budget, its finance minister said on Monday.
The country has currently budgeted 381.3 trillion rupiah ($22.5 billion) for energy subsidies and to compensate state firm Pertamina and utility company PLN for their efforts to keep some fuel prices and electricity tariffs at an affordable level.
China
China has asked refiners to halt signing new contracts to export fuel and to try to cancel shipments already committed, sources with knowledge of the matter said last week.
The guidance did not apply to jet fuel refuelling for international flights, bonded bunkering or supplies to Hong Kong or Macau, they said.
Bangladesh
Bangladesh will close all universities from Monday, bringing forward the Eid al-Fitr holidays as part of emergency measures to conserve electricity and fuel.
