Releasing oil reserves, removing fuel taxes, setting price caps... The energy defense battle in Asia is escalating!

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Since early March, the Middle East conflict has continued to escalate, impacting global energy supply chains. The Strait of Hormuz, a key artery for global energy transportation, has come to a near standstill, with large volumes of oil and natural gas shipments blocked.

Brent crude prices have surpassed $100 per barrel. As the world’s largest oil-importing region, Asia is bearing the initial brunt. Governments in several countries have started intensively rolling out emergency policies, from releasing strategic reserves to limiting fuel price increases, in attempts to stabilize domestic energy markets.

According to Bloomberg, the Vietnamese government announced last Friday it will abolish fuel import tariffs and grant greater flexibility to the state-owned energy conglomerate PetroVietnam in crude and refined products trading. The government said that current supply is "basically secured," but warned that if the conflict extends into April, the market may face even greater pressure. On Monday, South Korean President Lee Jae-myung announced at an emergency cabinet meeting that the government will impose a maximum price cap on oil products—the first time in nearly 30 years South Korea has used this administrative tool.

Due to the ongoing Middle East escalation, South Korea's financial markets have come under significant pressure. The KOSPI Index fell by as much as 8% on Monday, triggering the circuit breaker mechanism for the second time this month; the Korean won fell more than 1%, approaching the critical psychological threshold of 1,500 won per U.S. dollar.

Vietnam: Lowering Taxes and Easing Restrictions, Guiding Supply with Market Mechanisms

According to Bloomberg, the core goal of Vietnam’s move to abolish fuel import tariffs and ease PetroVietnam's import quota restrictions is to lower procurement costs, attract more import sources, and enhance supply flexibility.

Pham Luu Hung, Chief Economist at SSI Securities, said that the relaxation of controls over PetroVietnam will give the company greater operational freedom to balance supply and demand.

Vietnam’s current crude oil output is around 180,000 barrels per day, far below domestic consumption needs. The operation of the country’s two main refineries is generally stable: the Dung Quat refinery’s capacity utilization is approximately 118%, a level that will last at least through the end of April; the Nghi Son refinery’s supply contracts also cover up to the end of March. The government has concurrently instructed the Ministry of Industry and Trade to take active measures to ensure ample supply, with priority given to securing crude for domestic refineries.

However, signs of supply strain have already appeared at the retail end. According to VnExpress, the price of RON-95 gasoline has risen from 20,151 dong per liter at the end of February to 27,040 dong (about $1.06); diesel prices have increased by nearly 57%, both reaching their highest levels since 2019. The government has raised retail gasoline prices twice in three days. According to Dan Tri, dozens of gas stations in Hanoi have temporarily closed or shortened operating hours due to consumers rushing to buy fuel.

South Korea: Price Caps Reinstated for the First Time in Thirty Years

In South Korea, the government has chosen even more direct administrative intervention. In his opening remarks at the cabinet meeting, Lee Jae-myung said that high dependence on Middle Eastern energy imports has made the current crisis "a significant burden on our economy," and the government will "implement oil product price caps quickly and decisively." He also announced that South Korea will actively seek alternative energy sources outside the Strait of Hormuz to reduce dependence on Middle Eastern shipping routes.

This is the first time in nearly 30 years South Korea has imposed price caps on petroleum products. In terms of market stabilization measures, Lee proposed enlarging the scope of the 100 trillion won market stabilization plan and called on the government and central bank to prepare additional responses to ongoing volatility in financial and foreign exchange markets.

Taiwan has adopted a similar price buffer mechanism to South Korea. According to Taiwanese media, Taiwan will set a weekly cap on oil price increases, with the government covering any excess costs, in order to maintain price stability for households and businesses.

Bangladesh Responds to Crisis by "Curbing Demand"

Countries with an even higher dependence on energy imports have started to directly curb consumption.

The Bangladeshi government announced that all universities nationwide will close early from March 9, and the Eid holiday will be brought forward, to reduce electricity and fuel consumption.

Officials said that university dorms, laboratories, and air conditioning systems consume significant electricity, and ending classes early will help relieve pressure on the power grid.

Bangladesh relies on imports for about 95% of its energy. Recent gas shortages have forced four out of five state-owned fertilizer plants to halt production to reallocate natural gas for power generation.

The government has also restricted daily fuel sales and is buying high-priced liquefied natural gas (LNG) on the spot market to fill the supply gap.

A senior official at the Energy Ministry stated: “We are doing everything possible to reduce consumption and ensure the stability of electricity, fuel, and import supplies.”

Japan Prepares to Release Strategic Oil Reserves

On the supply side, Japan is also preparing for the most extreme scenarios.

The Japanese government has ordered the Shibushi National Petroleum Reserve Base in Kagoshima to prepare for a crude oil release. Multiple officials confirmed that this is one of the clearest signals yet of using the reserves.

About 95% of Japan’s crude oil imports come from the Middle East, with roughly 70% passing through the Strait of Hormuz. Once the route is disrupted, supply risks rise rapidly.

Japan currently holds around 260 million barrels in government strategic reserves, plus corporate inventories and joint reserves with Middle Eastern oil-producing nations, totaling about 440 million barrels—equivalent to roughly 204 days of imports.

If Tokyo ultimately decides to release reserves, the market’s focus will be—will it bypass the International Energy Agency (IEA) coordination mechanism and act independently?

The Persian Gulf Shock Far Outweighs Russia-Ukraine, Asia Bears the Greatest Pressure

This round of energy shock is far greater in magnitude than previous ones. Market analysis estimates the disrupted export volume from the Persian Gulf is close to 17 million barrels per day—about 17 times the peak loss of Russian supply during the Russia-Ukraine conflict in 2022. Oil price volatility has soared to extreme levels over 100.

Goldman Sachs analysis shows that as the largest oil-importing region globally, Asia is bearing uneven pressure from the shock. Singapore is hit the hardest, followed by South Korea. Assuming an $85 oil price, GDP growth pressure is already as high as 1.6 percentage points; with Brent now above $100, the actual hit could be deeper.

Against this backdrop, Asian economies are responding to the same pressure with varied tools. However, if high oil prices persist, whether governments can continue to fill the subsidy gaps created by price controls with fiscal resources will become a core risk variable closely watched by investors.

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