Asian Nations Battle Surge in Oil Prices Amid Iran War

Governments across Asia are scrambling to limit the economic impact of surging oil prices triggered by the Iran war, which has fueled a record surge in oil prices. Key producers have cut output, and Tehran has signaled that hardliners will remain in charge.

In South Korea, President Lee Jae Myung announced Seoul would cap fuel prices for the first time in nearly 30 years to mitigate the impact on consumers. Speaking at an emergency meeting, Lee called the crisis "a significant burden on our economy," which is highly dependent on global trade and energy imports from the Middle East.

Japan's government instructed a national oil reserve storage site to prepare for a possible crude release, though no decision had been made. Japan imports about 95% of its oil from the Middle East and has reserves to cover 354 days of consumption. Meanwhile, Vietnam removed import tariffs on fuels, and Bangladesh shut universities to conserve electricity and fuel.

China last week asked refiners to halt fuel exports and try to cancel shipments already committed. US President Donald Trump attempted to downplay concerns about rising US fuel prices, which were up 11% for the week on Friday. Senate minority leader Chuck Schumer called on him to sell oil from the strategic petroleum reserve.

Oil jumped 25%, with Brent on track for a record one-day gain, after Iran named Mojtaba Khamenei to succeed his father as supreme leader. Opec producers Kuwait and Iraq cut oil output during the weekend as the crucial Strait of Hormuz remained effectively shut. Across Asia, which sources 60% of its oil from the Middle East, stock prices slid and the dollar rose.

Oil prices declined in extended trading Monday after U.S. President Donald Trump said in a phone conversation with CBS News that he was considering seizing control of the Strait of Hormuz. He added that "the war is very complete, pretty much," after which U.S. key indexes rebounded from earlier losses.

U.S. stock futures slipped Monday night as traders assess Trump's comments — who also said in a press conference on Monday that the war will end "very soon" — and as they monitor the latest developments out of Iran. The Strait of Hormuz is a critical chokepoint that's been effectively closed, with a spokesperson for Iranian Ministry of Foreign Affairs, Esmail Baghaei, warning that oil tankers passing through the waterway "must be very careful." Baghaei also told CNBC's Dan Murphy that Iran was not responsible for the war, and targeting U.S. "military bases and assets" in the region was "legitimate under international law."

The oil shock on Monday spurred South Korea to impose a price cap on fuel products for the first time in 30 years. President Lee Jae Myung said the government will explore ways to diversify its energy import sources, according to a TV broadcast, as gasoline prices in the country surge.

Amid the geopolitical and energy turmoil, people have been placing bets on the Iran war, prompting a backlash and raising questions about the red lines prediction markets should enforce. Last week, Polymarket reportedly posted on X the odds of a nuclear detonation by year-end, drawing online outcry, before it deleted the post and removed nuclear-related markets.

Oil prices jumped Monday with traffic in the Strait of Hormuz at a near standstill, but the longer-term implications of the Strait's closure may be more extreme for the liquefied natural gas market. That's in part because it's more difficult to move than crude oil, and LNG production is more concentrated.

Roughly 20% of global LNG flows through the Strait — the majority of which is exported from Qatar — and global gas prices are surging after the country last week halted output following an Iranian drone attack.