India hikes fuel prices as Iran crisis bites

India, the world's third-largest oil importer, has increased fuel prices by approximately 3% to offset losses caused by an energy crisis. The price hike, effective Friday, raises gasoline to 97.77 rupees per liter and diesel to 90.67 rupees per liter. This measure is a direct response to supply disruptions and rising energy costs stemming from the Iran crisis and the closure of the Strait of Hormuz, a crucial transit route for nearly half of India's crude oil imports. The government also announced austerity measures, urging citizens to conserve fuel, work from home, and reduce travel, framing fuel saving as an act of patriotism. These steps come after Prime Minister Narendra Modi's appeal for voluntary austerity, though opposition leaders pointed out that fuel prices remained unchanged during recent state elections.

Indian Prime Minister Narendra Modi is urging citizens to reduce gold purchases and foreign travel due to growing pressure on the country's foreign exchange reserves. While India's reserves are substantial, demand for dollars is rising faster than supply, driven by increased imports of oil, gas, fertilizer, and gold. This is occurring as foreign investment slows and exports weaken, exacerbated by geopolitical uncertainty. The government has already raised import duties on gold and silver to 15% to curb demand. Economists warn that these pressures could lead to a prolonged economic crisis if not managed effectively, potentially requiring consumers to share the burden of adjustment.

Pakistan is facing a severe economic and political crisis due to a dramatic surge in its fuel import bill, which has tripled from $300 million to $800 million. This significant increase, attributed to rising global energy prices exacerbated by the Middle East conflict, threatens to destabilize the economy and undermine Prime Minister Shehbaz Sharif's government. The escalating fuel costs are expected to trigger a chain reaction, impacting agriculture, transportation, food prices, and the cost of basic goods, worsening an existing cost-of-living crisis for families. In response, the State Bank of Pakistan has raised its key policy rate to 11.5 percent, acknowledging the intensified macroeconomic risks from prolonged conflict and supply chain disruptions.

UK Chief Secretary to the Treasury Darren Jones stated that the UK will likely experience higher prices for energy, food, and flights for at least eight months following the end of the conflict in Iran. The closure of the Strait of Hormuz, a vital oil and gas shipping lane, has already driven up oil prices. Jones indicated that these elevated costs are a consequence of the conflict's impact on energy production and supply chains, rather than immediate shortages. The government is monitoring stock levels and supply chain disruptions, and is also working to secure carbon dioxide supplies. The US has announced a ceasefire extension, but further de-escalation efforts have stalled.