How the Iran war is also unleashing an economic world war

Countries across South Asia are imposing emergency measures like rationing energy, closing universities, cutting short workweeks and even changing the way crematoriums work to deal with the fallout from the Iran war. Why it matters: Yes, the war is raising gas prices for Americans and causing a political headache for President Donald Trump — but it's also creating a deeper crisis abroad that governments and businesses are scrambling to manage.

The big picture: It's the latest global economic shock in a turbulent decade.

The 2020s have seen a pandemic, Russia's invasion of Ukraine and the resulting inflation, and, more recently, Trump's "Liberation Day" tariffs, which rocked markets and panicked some countries.

Between the lines: The laws of supply and demand make the math fairly straightforward here: 20% of the world's oil and other energy products go through the Strait of Hormuz, and Iran has effectively shuttered traffic.

When supply drops sharply and demand doesn't change, prices go up and shortages result. Governments do what they can to manage both supply (tapping oil reserves or restricting exports), as well as demand — price controls, restrictions on working hours and even shutting down businesses to conserve energy. The disruption isn't only about oil. Other crucial related products pass through the strait, including diesel, jet fuel and liquefied petroleum gas, used for heating and cooking.

By the numbers: More than 80% of the oil and petroleum products moving through the strait went to Asia in 2024.

By the end of this week, "we expect crude supply cuts to approach 12 million barrels a day, making the deficit highly visible across physical markets," JPMorgan commodities analysts wrote in a note last week. The only way markets can deal with this shortfall is a "comparable reduction in consumption."

Here are some of the steps being taken now:

Bangladesh closed public and private universities. South Korea capped gas prices for the first time in nearly three decades. Thailand is encouraging work from home. Some local governments in the Philippines ordered civil servants to work four days a week. Pakistan has shut schools, mandated a four-day workweek for some government offices and raised gas prices, the Financial Times reports.

Zoom in: India is already struggling with shortages and hoarding. "The world's most populous nation is awash with reports of hoarding, theft and price gouging as citizens rush to secure supplies of increasingly scarce cylinders of liquefied petroleum gas," the Financial Times reports.

Hotels in Mumbai are shutting down. "It is like a second COVID-19 lockdown for us," the chairman of a popular restaurant chain told Indian Express. Pune, a city in India, temporarily suspended gas-based cremations because of restrictions on the use of liquefied petroleum gas, asking customers to use wood or electricity.

Zoom out: The countries and regions that rely on imports for energy are in the tightest spots.

While Asia's impacts are most acute, Europe is also facing the prospect of rising gas prices, which would raise electricity costs. The EU is considering a gas price cap and other measures. Japan this week started its largest-ever oil release from its national reserves —  and effectively capped prices.

The intrigue: China might benefit from this crisis long-term. It has a huge oil reserve and can shift to using coal for some production.

High oil prices, meanwhile, will be a boon for its renewable energy industry.

The bottom line: "We are victims of a war that is not of our choosing," Philippines President Ferdinand R. Marcos Jr. said in a statement last week.

When America sneezes, the world catches the flu.

--Rebecca Falconer contributed reporting.