NextFin News - Global energy markets entered a state of high alert this week as oil prices surged to $117 a barrel, forcing governments from Cairo to Canberra to implement emergency rationing and austerity measures. The spike follows the effective closure of the Strait of Hormuz, a maritime chokepoint responsible for 20% of the world’s oil and gas transit, as the conflict involving the U.S., Israel, and Iran enters its second month. With the assassination of Ayatollah Ali Khamenei four weeks ago failing to trigger the internal uprising U.S. President Trump had predicted, the region has instead descended into a protracted missile and drone war that is now strangling global supply chains.
The most severe responses have emerged in Asia and North Africa, regions most vulnerable to price volatility and supply disruptions. Egypt has ordered all restaurants, shops, and cafes to shutter by 9:00 PM, while street lighting and roadside advertising have been dimmed to conserve electricity. In a move reminiscent of the 1970s oil crisis, Sri Lanka and Myanmar have introduced strict fuel rationing; Sri Lankan drivers are now limited to just 15 liters of fuel per week. These measures are not merely precautionary but are essential survival tactics for nations whose foreign exchange reserves are being depleted by the soaring cost of energy imports.
Western economies are also feeling the heat, though their responses lean more toward fiscal intervention than physical rationing. In the United Kingdom, diesel prices hit 181.2p per liter on Monday, their highest level in over three years. While Chancellor Rachel Reeves has acknowledged that contingency planning is underway for "every eventuality," the British government faces mounting pressure to scrap a planned fuel duty increase. Across the Irish Sea, Ireland has already moved to cut taxes on petrol and diesel as part of a €235 million emergency package. Meanwhile, Australia has taken a different tack, with the states of Victoria and Tasmania making public transport free to incentivize citizens to leave their cars at home.
JPMorgan analysts warned in a report last week that while Asia is feeling the first wave of the shock, the economic "aftershocks" will inevitably spread westward. The bank noted that the continued shutdown of the Strait of Hormuz will likely force the Bank of Japan and other central banks to raise interest rates to combat imported inflation, even as economic growth slows. This stagflationary threat is particularly acute in Japan, where the government has already begun tapping into its 30-day strategic oil reserves to keep pump prices near 170 yen per liter.
China, the world’s largest oil importer, has reportedly ordered its refineries to halt fuel exports to prioritize domestic stability. While Beijing holds an estimated 900 million barrels in reserve—enough to cover roughly three months of imports—the long-term viability of this buffer depends entirely on the duration of the blockade. In Southeast Asia, the Philippines has declared a national emergency, with President Ferdinand Marcos stating that "nothing is off the table" as the country grapples with diesel prices that have more than doubled since the conflict began.
The efficacy of these emergency measures remains a subject of intense debate among energy economists. While rationing and subsidies provide immediate relief to consumers, they do little to address the underlying supply deficit created by the Hormuz blockade. In Pakistan, the government has mandated a four-day work week and restricted wedding guest lists to 200 people to save energy, yet such measures are ultimately stopgaps. As long as the maritime corridor remains a combat zone, the global economy remains tethered to a volatile geopolitical reality that no amount of domestic austerity can fully mitigate.
Explore more exclusive insights at nextfin.ai.
