Middle East conflict: Asia retail fuels - Absorbing the shock, deferring the cost

With the closure of the Strait of Hormuz and Asia’s heavy reliance on Middle Eastern imports, fuel prices across the region have witnessed substantial increase, forcing governments to step in to shield consumers from surging costs. This could push Asia’s fuel subsidy burden up to US$ 55 billion over the next four months, with APAC countries responding in divergent ways. We expect that, in the short term, governments will face rising fiscal pressure as they fund the gap between free‑market fuel prices and artificially low domestic pump prices, a challenge that is intensified by high global prices and limited domestic crude resources. Over the longer term, sustained reliance on subsidies is likely to delay investment in fuel infrastructure, as state owned companies struggle with tight financial constraints and private players remain deterred by regulated markets, resulting in visible underinvestment in refining, storage, and retail capacity across the region.