The war involving Iran is now in its eighth month, and Asia continues to bear much of its economic cost. Most of the oil that normally passes through the Strait of Hormuz goes to Asian buyers. When that flow is disrupted, the effects reach fuel prices, inflation, currencies and government budgets across the region.

This article explains where the conflict stands, how it reaches Asian economies, and the main strategies governments have used to limit the damage.

Where things stand

Diplomacy has not yet produced a deal. Iran proposed a seven-day roadmap under which the Strait of Hormuz would reopen after steps including the release of frozen funds, the lifting of oil sanctions and an end to the US naval blockade of Iranian ports. US President Donald Trump rejected it on 26 September, saying it "would not be acceptable", Al Jazeera reported.

Shipping is partly recovering. Oil leaving the Gulf through Hormuz roughly doubled within a month, to about 13 million barrels a day, according to tanker-tracking data cited by Fortune. But costs remain extreme. Rates for very large crude carriers on the Oman–China route topped US$870,000 a day in September, and the West Africa–China route hit an all-time high, USNI News reported.

The supply shock is still large. The International Energy Agency said in September that more than 10 million barrels a day of Gulf output remained offline, and that global stocks had fallen by 507 million barrels since February (IEA). The agency said in March that the war was "creating the largest supply disruption in the history of the global oil market" (IEA).

Brent crude traded near US$98 a barrel on 1 October (Trading Economics). The physical benchmark, Dated Brent, peaked at US$113.48 on 9 September, according to the IEA.

How the shock reaches Asia

1. Energy import bills. In 2024, about 84% of the crude oil shipped through Hormuz went to Asia, with China, India, Japan and South Korea taking most of it (EIA). The cost is now showing in trade data:

  • India: Its crude import bill rose 48% to US$74.8 billion in April–August, The Statesman reported.
  • Japan: It recorded a fourth straight monthly trade deficit in August as oil imports soared, according to Japan Today.

2. Inflation. Higher fuel costs pass into transport and food prices. Philippine inflation was 6.1% in August (Inquirer). The Reserve Bank of Australia said on 29 September that "higher fuel prices have partially been passed through to prices of other goods and services" (RBA).

3. Currencies and capital. Currencies of oil importers with external deficits, including the rupiah, the Indian rupee and the Philippine peso, have weakened against the dollar this year, according to Asian Development Bank market data. For a country-by-country look, see our analysis of which Asian economies look most exposed.

4. Fertiliser and food. The Middle East supplies about a quarter of world urea exports. Urea prices rose above US$850 a tonne in April, up about 80% since February, the World Bank noted. Higher fertiliser costs eventually reach food prices.

5. Aviation. The global airline association IATA halved its 2026 industry profit forecast in June. Director General Willie Walsh said "war-related disruptions in the Middle East and rising fuel costs have shifted the outlook for airlines to the worse" (IATA).

One channel holding up: remittances. Money sent home by workers in the Gulf has stayed resilient so far. Pakistan received US$3.66 billion in August, up 16.5% on a year earlier, The News reported.

Strategy 1: Defend the currency with interest rates

Several central banks raised rates to support their currencies and contain inflation:

Central bank Action in 2026 Current rate
Bank Indonesia +100bp between May and June; on hold since 5.75%
Bangko Sentral ng Pilipinas Three hikes, latest in August 5.00%
Bank of Korea Two consecutive hikes, latest 27 August 3.00%
Bank of Japan Hike on 18 September 1.25%
Reserve Bank of Australia Fourth hike of the year on 29 September 4.60%
Reserve Bank of India Held through 2026 5.25%

Track each decision on our APAC central bank rates tracker.

Bank Indonesia has also intervened in currency markets and tightened the limit on foreign-currency purchases made without an underlying transaction, to US$25,000 a person a month from June and US$10,000 from 1 July. In Japan, the Ministry of Finance spent ¥15.4 trillion between late July and late August to support the yen (MOF).

Strategy 2: Shield consumers through the budget

Governments have used fiscal measures to soften the impact at the pump:

  • Indonesia: Subsidised Pertalite and Biosolar prices are frozen until the end of 2026. "There will be no price increase for Pertalite or other subsidized fuels," Deputy Energy Minister Yuliot Tanjung said on 30 September, as reported by ANTARA.
  • Malaysia: Subsidised RON95 petrol was held at RM1.99 a litre under the BUDI95 scheme as of May, with the monthly quota cut from 300 to 200 litres from April, The Star reported. As an oil producer, Malaysia has more room to absorb the cost.
  • India: The government cut excise duty on petrol and diesel in March, Al Jazeera reported.
  • Thailand: The state Oil Fund, used to cap diesel prices, has run a deficit of about THB80 billion, according to The Nation.

The trade-off is fiscal. Subsidies protect households but widen deficits, which can in turn worry investors. Indonesia has prepared about Rp100 trillion in additional energy subsidies, IDN Financials reported.

Strategy 3: Secure supply

  • Stockpile releases: IEA members agreed in March a collective release of oil stocks totalling 426 million barrels, with Japan contributing 79.8 million and South Korea 22.5 million (IEA).
  • New suppliers: Japan bought Russian crude from the Sakhalin-2 project for the first time since Hormuz closed, The Moscow Times reported.
  • Alternative routes: Saudi Arabia's East-West pipeline to the Red Sea port of Yanbu has resumed pumping at reduced rates after an attack, with Aramco reportedly targeting about 4 million barrels a day while repairs continue, OilPrice reported.
  • Demand restraint: Some economies have asked people to use less fuel. Pakistan moved government staff to a four-day week, Sri Lanka rationed fuel with a QR-code system and Thailand urged energy-saving measures such as online meetings, Al Jazeera reported.

Strategy 4: Regional safety nets

At their May meeting, ASEAN+3 finance ministers and central bank governors urged members to complete the steps needed for a new rapid financing facility under the Chiang Mai Initiative to take effect (AMRO). The facility is designed to provide short-term support to members facing balance-of-payments pressure.

Is it working?

So far, the region has avoided a collapse in growth. The Asian Development Bank expects developing Asia to grow 5.0% in 2026, slower than 5.5% in 2025. "The region has remained resilient, but the risks are growing," ADB President Masato Kanda said, pointing also to a strengthening El Niño (ADB).

Each strategy has limits. Rate hikes slow growth. Subsidies strain budgets. Intervention drains reserves. Stockpiles are finite. The longer Hormuz stays disrupted, the harder these trade-offs become.

What to watch

  1. US–Iran talks, and any agreed timetable to reopen Hormuz.
  2. OPEC+ meeting on 4 October, and whether more supply is added.
  3. Fuel-price decisions at the start of each month in Indonesia, Malaysia and Thailand.
  4. IMF's October World Economic Outlook, with updated country forecasts.
  5. Central bank meetings in October: the Reserve Bank of India on 5–7 October, Bank Indonesia on 20–21 October, the Bank of Korea on 22 October and the Bank of Japan on 29–30 October.

This article was researched with AI assistance and reviewed by the NDNews editorial team. It is based on official releases and media reports as of 1 October 2026. It is not investment advice.