Asia Caps Fuel Prices as Oil Prices Skyrocket
Countries across Asia are rolling out emergency measures to protect their economies from the energy shock unleashed by the US-Israel war with Iran, with fuel price caps, tax cuts and shorter working weeks all on the table.
South Korea
South Korea has gone furthest, with President Lee Jae Myung announcing the country's first cap on domestic fuel prices in nearly 30 years. Speaking at an emergency cabinet meeting, he said the government would "swiftly introduce and boldly implement" a maximum price system on petroleum products "that have recently seen excessive price increases." The cap could take effect as early as this week and be revised every two weeks.
Lee also said Seoul's 100 trillion won (around $67bn) financial markets stabilisation fund should be expanded if conditions worsen, and called on both the government and the central bank to prepare additional responses to currency and market volatility.
The KOSPI stock index closed 6% lower Monday after briefly falling 9%, which was enough to trigger circuit breakers for the second time this month. The won slipped close to the psychologically significant level of 1,500 per dollar.
Presidential policy adviser Kim Yong-beom said South Korea has sufficient oil reserves to cover 208 days of consumption, and could tap an additional 20 million barrels stored jointly with oil-producing nations. Around 1.7 million barrels per day of crude shipped to South Korea passes through the now-blocked Strait of Hormuz.
About 14% of the country's natural gas imports this year come from the Middle East, with roughly 5 million tons of Qatari supplies expected to be disrupted, though Kim said domestic gas customers should be insulated as alternative sources can be found. Lee also said South Korea would seek energy suppliers outside the Strait of Hormuz corridor entirely.
Thailand
Thailand has also announced a 15-day diesel price cap after long queues formed at petrol stations in recent days and supplies ran low at some outlets. Prime Minister Anutin Charnvirakul urged citizens not to panic-buy fuel. Vietnam's finance ministry said it is preparing to temporarily scrap taxes on fuel imports, while the Philippines introduced new energy-saving rules.
Philippines
In the Philippines, President Ferdinand Marcos Jr has announced a four-day working week for most public offices, excluding critical services. Universities in Bangladesh have been closed from Monday to reduce energy consumption.
China
China, the world's second-largest oil consumer, raised the regulated ceiling prices for retail petrol and diesel by 695 yuan ($100) and 670 yuan ($97) per metric ton respectively — the sharpest single adjustment since March 2022. Beijing had already asked refiners last week to halt fuel exports and try to cancel committed shipments as the conflict curtailed refinery output.
A Supply Chain Crisis
Asia's exposure to the crisis is particularly acute. East Asian economies are heavily dependent on Middle Eastern energy, almost all of which travels through the Strait of Hormuz, which has effectively shut down since Iran threatened to attack any vessels attempting to pass through.
Roc Shi from the University of Technology Sydney described the situation as a "supply chain crisis, not just a price spike," especially for Japan and South Korea, which source the majority of their energy from Gulf states. Shi warned that fuel price caps, while "politically attractive" for offering "visible relief," could backfire by triggering panic buying and supply shortages.
OCBC bank strategist Christopher Wong said prices could reverse "relatively quickly" if tensions ease, but could keep climbing if production or shipping disruptions deepen.
Washington has pushed back on alarm over energy costs. President Trump called the oil price jump a "small price to pay" for neutralising Iran's nuclear threat, while Energy Secretary Chris Wright said prices would fall once the US destroys Iran's ability to strike tankers in the Strait.
