Asian governments are taking drastic measures to save oil, gas and foreign currency. The crisis shows how dependent the region is on the Persian Gulf – and how quickly political risks arise from this.
May 11, 2026, 8:23 p.mMay 11, 2026, 8:23 p.m
The energy crisis has reached Asia with full force. In India, Prime Minister Narendra Modi is calling on the population to save money, in Sri Lanka electricity prices are rising, in Pakistan schools remain closed, and in Thailand air conditioning is being reduced. Within weeks, a geopolitical crisis in the Persian Gulf has turned into a stress test for households, companies and governments.
The immediate trigger is the Iran war and the blockade of the Strait of Hormuz. This is particularly dangerous for Asia: the region is more dependent on oil and gas from the Middle East than other regions of the world.
What primarily affects Europe as a price shock affects many Asian countries directly in terms of supplies, currency and ultimately social stability.
India shows how closely these levels are connected. Modi asked citizens to save cooking oil, avoid unnecessary trips abroad and not buy gold for now. In India, this not only affects individual purchasing decisions, but also deeply rooted habits: cooking oil is part of everyday life, gold plays a major role at weddings and as a private investment.
Gas station in Guwahati: The crisis has reached the continent.Image: www.imago-images.de
Farmers should also use less fertilizer, demands Modi. The reasoning is remarkably straightforward: India needs to conserve its foreign exchange reserves. The state does not want to increase the prices for diesel and gasoline at gas stations.
Saving becomes a state responsibility
Countries that have less financial leeway are hit even harder. Sri Lanka has announced that it will significantly increase electricity prices for larger consumers. Electricity customers who use more than 180 kilowatt hours per month will have to pay a surcharge of 18 percent from Monday, the island state’s supply commission announced on Sunday. For customers whose consumption is below this, the price should not change.
The move follows several other measures aimed at reducing energy consumption in Sri Lanka. “The price increase will be applied to industries, hotels, businesses and government agencies, as well as religious places of worship that consume more than 180 units per month,” the commission said in a statement. Electricity prices had already been increased by 40 percent last month. Gasoline became more than 35 percent more expensive and its allocation was rationed.
At the end of March, the authorities of the South Asian island state also ordered that the lights on street lighting and billboards be switched off from 9 p.m. In addition, a four-day week was introduced and home office regulations were reinstated in order to reduce traffic volume and thus fuel consumption.
The country is particularly vulnerable. Sri Lanka had to struggle to recover from the national bankruptcy in 2022. Now the energy crisis threatens to open up old wounds: rising prices, scarce foreign currencies, new burdens on companies and households.
Social peace depends on the price of energy
In many Asian countries, energy is more than just an economic factor. It is part of a silent political contract: the state keeps electricity, gasoline or gas for cooking affordable, but everyday life remains predictable. If this contract comes under pressure, governments will also come under pressure. In poorer countries it is not primarily about mobility, but about cooking, food prices and work.
In India, this is evident in liquid gas, which many households and small restaurants use for cooking. If this gas becomes scarce or becomes significantly more expensive, businesses close, migrant workers lose income and food becomes more expensive. Fertilizers also depend on gas and petrochemical raw materials. If factories produce less or come to a standstill, the crisis can affect crops. Then an energy crisis becomes a food crisis.
The situation is similar in Bangladesh and Pakistan. Where gas is diverted to power plants, industry is lacking. Where schools close and universities switch to online operations, energy should be saved – but at the same time it becomes clear how deep the shortage extends into everyday life. The measures are reminiscent of the pandemic: home office, online teaching, less commuting. Only this time the reason is not a virus, but an external shock to energy and raw materials.
A tourist in Colombo, the capital of Sri Lanka: Travel could also become more expensive due to a lack of fuel.Image: www.imago-images.de
Even wealthier economies are not protected. Japan and South Korea would be particularly hard hit if the Strait of Hormuz were blocked. It’s about power supply, industry and supply chains. If gas fails or becomes significantly more expensive, costs along global value chains rise. Microchips, electronics, chemical products and textiles are part of Europe’s supply.
For Europe it is therefore not just a distant crisis. If energy becomes more expensive in Asia, production costs will rise in the countries from which Europe sources electronics, textiles, intermediate products and agricultural goods. When supply chains stall due to scarce raw materials, expensive transport or closed factories, this also affects German companies.
New dependencies are looming
In the short term, many governments in Asia are resorting to familiar instruments: releasing reserves, capping prices, increasing subsidies, reducing consumption. But this policy has limits. Subsidies put a strain on households, price caps reduce the incentive to save, and rationing affects companies and citizens.
China is comparatively robust in this situation. Although the country is the largest importer of crude oil in the world, it has reserves, pipelines from Russia and large domestic wind and solar energy capacities. The state’s financial strength is also higher than in many emerging countries. This does not protect China from higher costs, but it does make it more resilient than many neighbors.
Added to this is China’s lead in renewable energies. The country is expanding wind and solar power on a large scale and controls large parts of the supply chains for solar modules, batteries and electric cars. This does not make China independent of oil and gas. But it gives the leadership more leeway if shipments through the Persian Gulf become more expensive or unsafe.
However, China is not completely immune. Industry still needs reliable energy, the transport sector is heavily dependent on oil, and higher import prices can put additional strain on the already weak economy.
At the same time, Beijing is likely to use the crisis politically: the more other Asian countries suffer from energy prices and a lack of foreign exchange, the greater China’s weight as a lender and trading partner will become. And dependencies are increasing.