Oil prices spike amid Middle East conflict: How governments worldwide are responding

The global energy markets are on edge as oil prices have surged past $110 (£82.74) a barrel for the very first time in four years in the midst of the US-Israel war on Iran.

Brent is on track for a record one-day gain as on Monday, Brent crude in Asia was almost 24 percent higher at $114.74.

Not only energy markets, but also the agricultural and industrial sectors have been experiencing the ripple effects of higher oil prices driven by the Middle East conflict.

Given the reverberating impact of unprecedented surge in oil prices, the governments across the world are rushing to shield their economies from the aftereffects of supply chain crunch and soaring prices.

Japan

The Japanese government has given instructions to a national oil reserve storage site to prepare for possible release of crude as the escalating crisis in the Middle East sends oil prices soaring 25 percent.

Japan is hit by the conflict as the country relies on the Gulf region for 95 percent of its crude supplies. Around 70 percent of supplies have passed through the Strait of Hormuz which has been closed following the attacks.

South Korea

South Korea has also announced on Monday to put a cap on domestic fuel prices for the very first time in nearly thirty years.

While speaking at an emergency meeting on the impact of Middle East crisis, the President Lee Jae Myung said the “government is swiftly planning to introduce and boldly implement ⁠a maximum price system on petroleum products "that have recently ​seen excessive price increases".

Besides imposing the fuel cap, the country will also diversify its energy sources beyond those shipped through the Strait of Hormuz.

In the case of emergency, the government will expand 100 ‌trillion ⁠won ($66.94 billion) market stabilisation programme and look for additional measures to mitigate the impacts of volatility.

The United States

The Trump administration launched a $20 billion maritime reinsurance plan to encourage shipping through high-risk zones and is fast-tracking oil reserve procurement.

According to Treasury Secretary Scott Bessent, the insurance plan combined with potential Navy escorts should quickly fix shipping in the region marred with the conflict.

Bangladesh

Bangladesh has announced extended Eid-ul-Fitr holidays from Monday as part of emergency measures to conserve fuel and petrol.

Pakistan

Pakistan announced a hike of Rs 55 per litre in the prices of diesel and petrol to deal with the surging international oil prices. Moreover, the government has also raised Treasury bill rates to 11 percent –almost 50 basis points more than the State Bank of Pakistan’s policy rate of 10.5 percent to tackle inflation which is going to be exacerbated by the turmoil in the Gulf region.

Vietnam

Vietnam is planning to slash import tariffs on fuels to ensure the fuel supplies amid the supply chain disruptions. The plan is expected to last until April which will reduce state revenue by 1.02 trillion dong.

Since the start of conflict, the domestic fuel prices in Vietnam have soared by 21-23 percent.