Tax cuts, rationing, curtailed work hours: The ways world is absorbing Iran war shock

As the fallout of the US-Israel-Iran conflict continues to ripple across global energy markets, governments from Asia to Europe and Africa are scrambling to shield their economies from an unprecedented fuel shock. With crude prices surging and supply chains disrupted—particularly through the critical Strait of Hormuz—countries are deploying a mix of emergency measures ranging from tax cuts and subsidies to rationing and demand curbs.

The crisis, unlike previous oil shocks, is not just about soaring prices but also a tightening of physical supply, forcing policymakers into crisis mode.

Here’s a look at how countries are responding:

South Asia: Rationing, austerity and regional dependence

India

India has moved swiftly to cushion the blow by slashing excise duties on petrol and diesel and imposing windfall taxes on fuel exports. Authorities have also diverted gas supplies to priority sectors and directed refiners to ramp up LPG production.

More from Business

At the same time, New Delhi is balancing domestic needs with rising regional demand. Several neighbours—including Sri Lanka, Bangladesh and Maldives—have sought fuel assistance, underscoring India’s emerging role as a regional energy stabiliser.

Sri Lanka

Still recovering from its 2022 financial crisis, Sri Lanka is facing acute shortages. The government has approved emergency fuel purchases outside regular tenders to bridge a deficit of over 90,000 metric tonnes.

Authorities have introduced fuel rationing, declared a weekly public holiday to conserve energy, and raised power tariffs. The country is also securing supplies from India and other partners to keep critical sectors such as agriculture and tourism running.

Pakistan

Pakistan has imposed aggressive conservation measures, including shutting shopping malls and markets by 8 pm and reducing fuel allowances for government departments.

The country has also shortened work weeks and implemented partial work-from-home policies, while sharply raising fuel prices amid fiscal constraints.

Bangladesh and Nepal

Bangladesh has curtailed operating hours for offices and malls, banned decorative lighting, and restricted fuel use. Nepal has extended weekly holidays, raised fuel prices, and is pushing for a transition to electric vehicles while rationing cooking gas.

Africa: Tax relief amid supply chaos

South Africa

South Africa has opted for short-term tax relief, cutting its fuel levy by 3 rand per litre for one month to offset rising costs. However, the move comes amid record fuel price hikes, with diesel prices surging sharply.

Fuel shortages have already triggered panic buying, long queues, and rationing at petrol stations, with some outlets running dry. The government is working on broader support measures to cushion households and key sectors.

Asia-Pacific: Airlines cut flights, governments urge restraint

Australia

Australia has halved fuel excise for three months and rolled out a national fuel security plan. Authorities are urging citizens to limit fuel consumption voluntarily.

China

China remains relatively insulated due to large strategic reserves and diversified energy sources, though it continues to manage supply risks carefully.

Beijing has also adjusted domestic fuel pricing in line with global trends. The government has raised retail gasoline and diesel prices by 420 yuan and 400 yuan per metric tonne respectively, marking another increase within weeks.

The National Development and Reform Commission said the move is aimed at reflecting rising international oil prices while continuing measures to control volatility in the domestic market.

Southeast Asia

Countries like Thailand and Vietnam are focusing on demand reduction—encouraging remote work, carpooling, and reduced air-conditioning use.

Airlines across the region are among the hardest hit. Carriers are cutting flights, carrying extra fuel, and adding refuelling stops as jet fuel prices have more than doubled.

Air New Zealand has slashed flights and raised fares, reflecting industry-wide stress.

Europe & developed economies

United Kingdom and European Union

The UK has largely avoided sweeping interventions, focusing instead on targeted financial support for vulnerable households.

The European Union, meanwhile, is combining short-term relief—such as subsidies and tax cuts—with a longer-term push towards renewable energy to reduce dependence on imported fossil fuels. Some countries are even reconsidering coal usage to ensure energy security.

New Zealand and Canada

New Zealand has rolled out targeted cash support for middle-income households, while Canada has so far refrained from major intervention.

Americas: Market-driven responses dominate

In the United States, the response has focused on boosting domestic oil production rather than offering broad consumer subsidies.

Across South America, governments are allowing fuel prices to rise in line with global markets, with limited relief measures such as freezing public transport fares or delaying tax hikes. Countries like Brazil are partially shielded due to ethanol blending in fuel.

A crisis with no easy fixes

The current fuel shock has exposed the vulnerability of import-dependent economies, particularly in Asia and Africa. Analysts warn that prolonged disruption could trigger broader economic instability, with rising transport costs feeding into inflation and slowing growth.

The International Energy Agency has already urged countries to conserve energy through behavioural changes such as reduced travel and lower fuel consumption.

With inputs from agencies.