Asia scrambles as oil surges 25% on Iran war fears

Governments across Asia are scrambling to limit the economic impact of surging oil prices triggered by the widening conflict involving the Iran, as global crude prices recorded one of their sharpest daily increases in years.

According to a report by Reuters, the price of Brent crude jumped around 25% on Monday amid fears of supply disruptions, production cuts by key producers and the continued closure of the Strait of Hormuz.

The surge came after Iran appointed Mojtaba Khamenei as the new supreme leader, succeeding his father Ali Khamenei, signalling that hardline leadership will remain in place.

In response to the price spike, governments across Asia have moved quickly to introduce emergency measures aimed at protecting consumers and stabilising energy supplies.

In South Korea, President Lee Jae Myung announced that the government would cap fuel prices for the first time in nearly 30 years, warning citizens not to panic-buy goods.

Lee said during an emergency meeting that the crisis represented “a heavy burden on our economy,” which relies heavily on international trade and imports about 70% of its oil from the Middle East.

Meanwhile in Japan, senior lawmakers said the government had instructed operators of national oil reserves to prepare for a possible release of crude supplies, although Chief Cabinet Secretary officials later said no decision had yet been made. Japan imports about 95% of its oil from the Middle East and currently holds reserves sufficient for about 354 days.

Other governments have also introduced measures to cushion the impact of rising energy costs. Vietnam has removed fuel import tariffs to reduce domestic prices, while Bangladesh ordered universities to close temporarily in an effort to conserve electricity and fuel.

China has also taken steps to tighten domestic fuel supply by asking refiners to halt fuel exports and attempt to cancel shipments that had already been ordered.

In the United States, President Donald Trump sought to play down concerns about rising petrol prices, which had already increased about 11% over the past week.

At the same time, Chuck Schumer, the Senate minority leader, urged the administration to release oil from the country’s Strategic Petroleum Reserve to ease pressure on fuel markets.

Oil markets were also shaken by supply disruptions in the Middle East. Iraq reduced output at its main southern oilfields by about 70%, cutting production to roughly 1.3 million barrels per day, according to industry sources.

Kuwait Petroleum Corporation has also reduced output and declared force majeure, while Qatar, the world’s second-largest exporter of liquefied natural gas, has suspended LNG shipments.

Analysts warned that other major producers such as Saudi Arabia and the United Arab Emirates could soon be forced to cut production as storage facilities fill up due to the closure of the Strait of Hormuz.

Muyu Xu, a senior oil analyst at Kpler, described the current market situation as a “perfect storm,” combining production cuts in the Gulf, the prolonged closure of the Strait of Hormuz and growing pessimism that the crisis will not ease anytime soon.

Asian financial markets have already reacted to the energy shock, with stocks falling and the US dollar strengthening as governments consider further measures, including the potential release of strategic oil reserves to stabilise global supply.