The Iran War Has Caused Energy Shortages in Many Asian Countries, and Governments Are Preparing for the Worst

As the United States formulates plans to end the Iran War, Asian governments are preparing for the worst energy situation, such as possible long-term and severe energy supply disruptions.

On Wednesday (March 25th), South Korea entered crisis mode and established an emergency economic working group to urgently respond to the adverse situation. The Philippines declared a state of national emergency and pointed out that "the imminent danger of extreme energy supply shortage" exists.

As the risk of supply shortages rises and may affect the entire economy, Japan is conducting an assessment of the entire supply chain of petroleum-related products. Indian Prime Minister Modi warned that this war might pose unprecedented challenges to India.

Assistant Governor of the Reserve Bank of Australia, Chris Kent, said in a speech in Sydney on Thursday that the conflict in the Middle East and related energy supply shocks might exacerbate inflation in Australia. He said: "The longer the conflict lasts, the greater the impact on the economy, and the greater the risk of a significant revaluation of asset prices."

The conflict in the Middle East has been ongoing for nearly a month, and various countries have begun to take urgent measures to deal with it, highlighting the significance of the Strait of Hormuz for global energy flow. Approximately one quarter of the world's maritime oil trade and many other commodities pass through this crucial waterway, with most of the goods being transported to Asia. Iran is located north of the Strait of Hormuz and has actually banned all ships except those with approved passage.

Most of the oil supplies of many Asian countries come from the Middle East, and their oil reserves are gradually being depleted.

Dr. Vivian, the Foreign Minister of Singapore, pointed out on Monday: "This vulnerability has existed for a long time, but it has never been subjected to such an extreme test as today."

The impact of supply shortages has been clearly felt across Asia: working hours have been shortened, street lights have been turned off, gas stations have been forced to close, and so on.

In Pakistan, even cricket fans have been forced to stay at home to watch televised matches to save fuel. According to informed sources, the local government has also planned to implement a fuel quota system for vehicles.

In some areas of Bangladesh, drivers have to queue for hours to refuel, with the queues stretching for up to one kilometer. The authorities have suspended the production of most fertilizer factories and are urgently seeking a $2 billion (approximately $260 million) multilateral loan to ensure there is enough energy to meet the surging demand during the summer.

Peter Mumford, the head of the Southeast Asia region of the risk consulting firm Eurasia Group, said: "There is growing concern about secondary and tertiary economic impacts, including flight cancellations, idle fishing vessels, and the severe damage to the tourism industry."

Countries have taken actions to ensure the supply of oil and other key commodities, leading to the resurgence of protectionism. China has restricted fertilizer exports, Indonesia will impose taxes on coal and nickel exports, and Vietnam will prioritize domestic refineries for processing crude oil.

These measures may have counterproductive effects. A 2000s mid-term research report by the World Bank on food shortages found that a large part of the increase in global prices for grains and wheat was due to trade barriers set by countries to ensure food supply for their own populations.

The energy crisis is even changing the geopolitical situation.