Governments across Asia are facing mounting economic pressure as the ongoing conflict involving Iran continues to disrupt global energy flows and drive up prices.
According to regional estimates, the energy shock has forced policymakers to respond with subsidies, tax cuts, and other financial measures to cushion consumers from rising fuel costs.
The Asian Development Bank has lowered its growth forecast for developing Asia and the Pacific to 4.7% for this year and 4.8% for 2027, down from earlier projections, while also raising its inflation outlook to 5.2%.
Oil imports across Asia—one of the world’s largest energy-consuming regions—have dropped sharply, falling by about 30% in April compared to last year, according to Kpler data, reaching their lowest level since 2015. The decline follows major disruptions linked to instability in the Strait of Hormuz, a key passage for global oil and gas shipments.
Fiscal pressure is increasing, especially in South Asia, as governments spend heavily on fuel subsidies and import duty reductions to prevent domestic price shocks.
Analysts note that countries are using multiple tools to manage the crisis. In India, state-controlled refiners have kept retail fuel prices relatively stable despite rising crude costs, absorbing significant losses per litre of diesel and petrol.
Other regional governments have imposed fuel-saving measures, restricted exports, and cracked down on hoarding. Some countries, including Australia, are also engaging in diplomatic efforts to secure stable energy supplies.
China has relied on large reserves, diversified energy imports, and selective export controls to manage supply pressures, while allowing limited exceptions for certain trading partners.
Despite the strain, analysts say the overall economic impact has been less severe than initially feared. However, concerns remain over whether current stability is sustainable or dependent on depleting reserves.
Currency markets in Asia have also come under pressure, with several emerging market currencies hitting record lows against the US dollar. The Philippine peso, Indian rupee, Thai baht, and Indonesian rupiah have all weakened since the start of the conflict, while the Chinese yuan has remained relatively stable and the Japanese yen has strengthened slightly following intervention by authorities.
