Asian governments took a string of urgent measures to limit the economic pain for consumers and businesses as a widening conflict tied to Iran sent oil prices sharply higher on Monday. The moves reflect concern that supply disruptions will filter through to broader inflation and market volatility.
In South Korea, where roughly 70% of crude imports come from the Middle East, President Lee Jae Myung announced a fuel price cap - the first such intervention in nearly 30 years - and cautioned against panic buying. Speaking at an emergency meeting, Lee described the situation as "a significant burden on our economy, which is highly dependent on global trade and energy imports from the Middle East."
Japan also took preparatory steps amid its heavy Middle East dependence, with a senior parliamentarian saying the government had instructed a national oil reserve storage site to prepare for a potential release of crude. Japan's chief cabinet secretary later clarified that no decision had been made to actually release stockpiles. Japan imports around 95% of its oil from the Middle East and maintains reserves sufficient to cover 354 days of consumption.
Other measures across the region included Vietnam removing import tariffs on fuels and Bangladesh closing universities to conserve electricity and fuel. China last week directed domestic refiners to halt fuel exports and to seek to cancel shipments already committed.
The price response was dramatic. Oil rose about 25% on Monday, with Brent crude on track for a record one-day gain. The spike followed Iran's appointment of Mojtaba Khamenei to succeed his father, Ali Khamenei, as supreme leader, and came as OPEC producers such as Kuwait and Iraq reduced output over the weekend while the Strait of Hormuz remained effectively closed.
In the United States, gasoline prices had climbed 11% for the week as of Friday. President Donald Trump sought to downplay concerns about higher U.S. pump prices on social media, arguing that short-term oil price increases were a small price to pay for safety and peace. Separately, Senate Minority Leader Chuck Schumer urged the administration to sell oil from the Strategic Petroleum Reserve.
Financial markets across Asia reflected the disruption. Stock indices declined and the dollar strengthened as officials weighed potential options to moderate the shock, including tapping strategic reserves. Analysts warned the market faced a confluence of adverse factors.
"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 Muyu Xu, senior oil analyst at Kpler.
On the production front, Iraq reduced output from its main southern oilfields by 70% to about 1.3 million barrels per day, according to three industry sources. Kuwait Petroleum Corp also began cutting output and declared force majeure. Qatar, the world's No.2 exporter of liquefied natural gas, had already halted LNG exports. Analysts cited in reports predicted that the United Arab Emirates and Saudi Arabia could be forced to cut output soon if their oil storage fills amid the Strait of Hormuz disruption.
The combination of production cuts, export halts and the effective shutdown of a key shipping choke point has amplified concern that energy supply disruptions could be sustained, complicating policy choices for governments balancing inflation control, household welfare and market stability.
Policy responses and market reactions
- Price capping in South Korea aimed at limiting immediate consumer pain.
- Preparatory steps by Japan to potentially release reserves, though no release decision had been taken.
- Export curbs and cancellation requests from China to keep more fuel at home.
- Production cuts and force majeure declarations by major regional oil producers.
Officials face tradeoffs between short-term consumer relief and longer-term fiscal and market consequences. The duration of the disruption and the potential for further retaliatory attacks or operational stoppages are central unknowns that will shape next steps.