Governments have already raided their policy toolkits by amping up subsidies to keep a lid on energy prices, restricting fuel use and ordering public officials to work from home (WFH).
Officials have shuttled across the globe to secure alternate oil and gas supplies, including from sanctions-hit Russia. It’s all coming at a cost to their budgets.
The disruption has laid bare how reliant the region is on Middle East energy, and how dwindling stockpiles may hit everything from Taiwan’s chip supply chain to rice harvests, Asia’s biggest food staple.
“Subsidies, export curbs, and WFH mandates blunt the immediate pain but won’t prevent deeper trouble if disruptions linger,” said Alicia Garcia-Herrero, chief economist for Asia-Pacific at Natixis.
“They’re political band-aids – popular short-term, fiscally costly, and market-distorting,” Garcia-Herrero said.
Even if the Strait of Hormuz reopens, it will take time to recover, with Asian countries having had a wakeup call to improve fiscal strength and energy security.
“The worst-case scenario if the war drags on would be blackouts, price spikes in food or fertiliser, and factory slowdowns,” Garcia-Herrero said.
If the strait were to reopen, she said “Apac recovery should be swift – weeks for rerouting and refinery flows to stabilise,” Garcia-Herrero added.
“It all depends on how long the conflict and high prices last. But most in Asia simply cannot afford to hold out for too long,” said Roland Rajah, lead economist and director at the Lowy Institute’s Indo-Pacific Development Center.
“Repeated shocks quickly exhaust fiscal space,” he said, citing examples such as the Covid-19 pandemic and tariffs.
Here’s a snapshot of how the region has responded so far to the fuel squeeze:
China
The world’s largest crude importer – and the biggest buyer of Iranian oil – has managed to mitigate the hit by diversifying its fuel sources for years.
It hasn’t resorted to touching its national oil reserves, which Bloomberg Intelligence estimates to be as much as 1.4 billion barrels, though it allowed state-run refiners to tap some commercial reserves.
It imposed price controls on energy and was said to have ordered private refiners to maintain 2025-level production at any cost.
Officials considered relief for struggling state-run airlines, according to people familiar with the matter.
As part of a broader strategy, China is reviving coal-to-gas projects. Underlining its healthy stockpiles, Chinese tankers appeared to be delivering diesel and other fuel to neighbours such as Vietnam and the Philippines.
India
The world’s No 3 oil importer is racing to shore up supplies. It is due to receive nearly 16 million barrels of Venezuelan crude in May and June, while state refiners snagged millions of barrels from Russia after the US issued a waiver.
It raised export taxes on diesel and jet fuel, though officials were forced to quickly scale back a doubling of plane fuel prices.
State-run oil firms have been ordered to keep fuel prices stable, averting widespread hikes at the pump. However, some owners of trucks – which move nearly 70% of the nation’s cargo – have reported facing diesel rationing.
Singapore
Singapore, which gets about 60% of its fossil fuels by sea in the form of LNG, is sourcing supplies from Latin America and Africa, and requiring power firms to maintain diesel reserves.
It unveiled a S$1 billion (US$784 million) support package including tax rebates and increased cost-of-living payments.
It even ordered government facilities to set air conditioning at 25°C (77°F) or higher and turn off non-essential equipment when not in use.
Officials also delayed a world-first sustainable aviation fuel levy until Oct 1.
Japan
Japan relies on the Middle East for more than 90% of its oil, leaving it vulnerable to the war shock, though it has made efforts to cut dependency on LNG from the Gulf.
It rolled out gasoline subsidies and tapped into national and private-sector oil reserves.
It allowed less efficient coal-fired power plants to participate in auctions for a year, which – combined with restarting a Tokyo Electric Power Co nuclear plant – is expected to offset about 40% of LNG imports previously received through the Strait of Hormuz.
Japan is also cracking down on gas-price gouging. While fortifying its own supplies, Japan pledged US$10 billion in funds for Southeast Asia to help source oil and secure critical supply chains.
Malaysia
Malaysia has kept some of the world’s lowest petrol prices, at RM1.99 (US$0.50) per liter for eligible drivers, by spending billions on fuel subsidies.
The government is now said to be considering a more targeted approach to subsidies after footing a US$1.8 billion monthly bill since the Iran war began.
Authorities deployed police to more than 100 petrol stations to combat smuggling, slashed monthly fuel quotas to 200 liters per citizen, and mandated government employees work from home starting April 15.
Malaysia also plans to increase biodiesel blends and diversify fuel sources.
Prime Minister Anwar Ibrahim urged a crackdown on what he called fake news about fuel prices.
Thailand
With rice-planting season looming, Thailand negotiated with Oman for fuel and Russia for fertiliser.
The government approved a ฿3.7 billion (US$114 million) relief package as well as loan programmes totaling ฿135 billion for clean energy, farmers and businesses.
It’s also cracking down on fuel smugglers, and ordered probes into hoarding and price manipulation.
Philippines
Highly vulnerable to shocks, the country imports 98% of its fuel from the Persian Gulf.
The Philippines tapped into emergency measures including suspending its wholesale electricity spot market and temporarily allowing certain industries to switch back to dirty Euro 2 fuel.
It is providing fuel subsidies, free rides and railway fare discounts, and proposed a price cap on imported rice.
President Ferdinand Marcos Jr has urged Southeast Asian nations to activate a 2009 fuel-sharing deal for members to supply as much as 10% of a distressed country’s fuel needs.