From pumps to power grids: Oil surge jolts global economy

The global economy is beginning to feel the full force of surging oil prices as conflict in the Middle East disrupts supply routes and drives up energy costs worldwide. With the Strait of Hormuz effectively blocked — a chokepoint that carries around a fifth of global oil supply — markets have reacted sharply, pushing fuel prices higher and triggering emergency responses across multiple countries.

Governments are now balancing two competing priorities: protecting consumers from rising costs while safeguarding fragile economic stability. The impact is already visible — from record fuel prices in major economies to power shortages, currency pressure and budget cuts in developing nations.

The crisis has also exposed how deeply interconnected global energy systems remain. Even countries not directly involved in the conflict are being forced to respond — cutting taxes, rationing energy, or tapping strategic reserves — as volatility spreads across markets and supply chains.

In the US, gasoline prices have surged past $4 per gallon, the highest level in nearly four years, according to the American Automobile Association.

The average stood at $4.018 per gallon, up from less than $3 at the end of February. Prices are even higher in some states, reaching $5.88 in California, $5.45 in Hawaii and $5.34 in Washington.

The spike adds pressure on the economy and political leadership, with fuel costs rising sharply following the escalation in the Middle East.

US President Donald Trump said countries upset by high fuel prices should “go get your own oil”.

The European Commission has urged member states to reduce oil and gas consumption, particularly in the transport sector.

Officials have proposed voluntary demand-saving measures, warning that rising costs and potential shortages could force governments to ask citizens to limit driving and flying.

Energy ministers are holding emergency discussions to coordinate responses across the bloc.

Sri Lanka has announced a nearly 40% increase in electricity prices as it struggles with an energy shortage.

Fuel prices in the country have already been raised three times this month, and authorities have introduced a four-day working week to conserve energy.

In India, the rupee has come under pressure, falling to a record low of over 95 against the dollar before recovering, highlighting the strain on import-dependent economies.

Bangladesh has ordered civil servants to cut electricity use, including switching off lights and reducing air conditioning, as part of emergency conservation measures.

Indonesia has opted to hold fuel prices steady despite rising costs, with the government ruling out increases for both subsidised and non-subsidised fuel.

At the same time, it is cutting spending elsewhere — including scaling back its free school meals programme to save an estimated $2.3 billion — as it adjusts to mounting budget pressure.

South Korea has launched its first oil swap programme, allowing refiners to borrow crude from strategic reserves and return it later.

The move is designed to cushion supply disruptions and reduce dependence on Middle East shipments, particularly as uncertainty grows around the Strait of Hormuz.

Iran is moving to impose tolls on vessels transiting the Strait of Hormuz, signalling tighter control over a key global energy route.

Meanwhile, Norway has announced temporary cuts to fuel taxes to offset rising costs for consumers.

Across multiple regions, governments are turning to a mix of subsidies, tax cuts and conservation policies to manage the shock.

- with inputs from agencies