Global Energy Markets Struggle Amid Middle East Tensions
Impact of Middle East Conflicts on Energy Prices
Following a surge in tensions in the Middle East, energy markets worldwide continue to feel the repercussions. Since February 29, 2026, crude oil prices have skyrocketed nearly 50%, reaching a peak of around $119 per barrel before stabilizing at approximately $100. This volatility has already begun to affect supply chains and fuel expenses globally.
India finds itself in a precarious situation, heavily reliant on imports for its substantial energy requirements, with a significant portion of oil and gas transiting through the Strait of Hormuz. As prices remain elevated and supply becomes uncertain, both consumers and government officials are seeking solutions.
To mitigate the impact, the Indian government has implemented several measures aimed at alleviating the burden on consumers and oil companies. The reduction of excise duties on petrol and diesel is projected to cost the government around Rs 1.3 lakh crore. Meanwhile, fuel retailers are absorbing significant losses, approximately Rs 24 for each litre of petrol and Rs 30 for diesel.
In an effort to maintain equilibrium, the government has reduced additional excise duties by Rs 10 per litre for both types of fuel. New export levies on diesel and aviation fuel have also been introduced to prevent excessive profits during these volatile price fluctuations. Currently, India's reserves can sustain demand for 60 days, although they could last up to 74 days under normal circumstances, necessitating careful monitoring of supply.
Regional Responses to the Energy Crisis
India's neighbors are also grappling with the fallout. Countries in South Asia are striving to manage rising costs and diminishing supplies. Nepal has recently increased fuel prices again, attributing the hike to international market conditions. Bhutan is exploring energy conservation strategies, including fuel rationing and encouraging remote work.
Sri Lanka has sharply raised fuel prices, nearing levels seen during its previous economic crisis, and has reinstated public holidays and rationing to reduce demand. Bangladesh is increasing diesel imports from India while facing power outages and rolling blackouts.
Pakistan is adjusting fuel prices, raising kerosene costs while maintaining stable petrol and diesel prices through government intervention. The repercussions are widespread: transportation costs are rising, inflation is increasing, and air travel expenses are soaring due to high aviation fuel prices.
Myanmar is experiencing fuel shortages and has restricted private vehicle usage, leading to long queues at petrol stations and a growing reliance on public transport. Additional train services have been introduced to accommodate the increased demand.
The Strait of Hormuz plays a crucial role in this turmoil, as nearly 20 million barrels of oil pass through it daily. Any disruption in this vital channel can significantly impact global supply. With ongoing tensions, countries are responding by adjusting taxes, rationing fuel, or attempting to reduce consumption. China is increasing its coal usage, while other nations are taking emergency measures, highlighting the extensive nature of this disruption.