US-Israeli war against Iran drives up prices in Global South
Developing economies in Asia, Africa and the Middle East are bearing the brunt of surging energy costs.
A worker counts banknotes after filling up the tank of a vehicle at a petrol station in Giza, Egypt, on March 10, 2026 [AFP]
As the United States-Israeli war with Iran sends tremors through the global economy, the poorest members of the Global South are the most exposed to the fallout.
In Asia, Africa and the Middle East, developing economies are bearing the brunt of surging energy costs prompted by the closure of the Strait of Hormuz and attacks on oil and gas facilities across the Gulf.
From Pakistan to Bangladesh and Sri Lanka, through to Jordan, Egypt and Ethiopia, policymakers are facing the double whammy of being both heavily dependent on imported energy and having limited financial firepower to absorb the shock of spiking prices.
In Pakistan, which imports about 80 percent of its energy from the Gulf and has lurched between economic crises for years, authorities have scrambled to roll out measures to conserve fuel.
Facing the depletion of the country’s petrol and diesel reserves within weeks, officials have closed schools, introduced a four-day working week for government offices, ordered half of the country’s public sector employees to work from home, and slashed fuel allowances for official business.
Pakistani Prime Minister Shehbaz Sharif said last week that he had decided against a proposed hike in petrol and diesel prices before the Eid Al-Fitr celebration, saying the government would “bear the burden” of rising costs.
A man gets his motorcycle refuelled at a petrol station in Dhaka, Bangladesh, on March 9, 2026 [AFP]
In Bangladesh, which imports about 95 percent of its oil and is expected to run through its fuel reserves within days, petrol pumps in some districts have run dry despite the introduction of fuel rationing.
Sri Lanka, which imports about 60 percent of its energy needs and is still reeling from an economic meltdown that began in 2019, has declared every Wednesday a public holiday and introduced a mandatory fuel pass for vehicle owners to conserve petrol and diesel, stockpiles of which are projected to run dry within weeks.
In Egypt, one of the biggest energy importers and among the most indebted economies in the Middle East, the government has ordered malls, shops and cafes to close by 9pm on weekdays and 10pm during weekends, and cut back on public lighting.
Facing growing pressure on public finances due to the government’s heavy subsidisation of fuel prices, Egyptian officials on March 10 announced price hikes of between 15 and 22 percent for petrol, diesel and cooking gas.
While acknowledging the burden on the public, Egyptian President Abdel Fattah el-Sisi said the move was necessary to avoid “harsher and more dangerous outcomes”.
Currency depreciation
The weakening of many developing countries’ currencies against the US dollar – the result of investors buying the greenback amid heightened geopolitical uncertainty – has compounded the situation by further driving up costs.
“Countries such as Indonesia and the Philippines have already seen their currencies at near record lows even before the start of the conflict, making imports, including oil, much more expensive,” said Azizul Amiludin, a non-resident senior fellow at the Malaysia Institute of Economic Research in Kuala Lumpur.
Much as the fallout of the war poses particular challenges for governments in developing countries, the effect on citizens is disproportionate, too.
In less advanced economies, citizens spend much more of their pay cheques on fuel and food, leaving them more exposed to rising living costs.
At the same time, governments in developing countries have less capacity to provide a safety net for those at risk of falling through the cracks.
Motorcyclists crowd a filling station and wait their turn to get fuel, in Lahore, Pakistan, on March 6, 2026 [AP]
With the US and Israel barely a month into their war and no clear timetable for its end in sight, many analysts expect things to get worse before they get better.
Khalid Waleed, a research fellow at the Sustainable Development Policy Institute in Islamabad, said rising transport costs would soon be felt at supermarket checkouts.
“Diesel is the backbone of Pakistan’s freight and agricultural economy,” Waleed said.
“Trucking costs have started climbing, and that will feed into everything from flour to fertiliser in the weeks ahead.”
Once Pakistan’s wheat harvest gets under way in April, food prices could spike well beyond their current levels, Waleed said.