（Singapore, 02.10.2026）Governments around the world are spending heavily to protect households and businesses from surging energy costs, but their ability to keep doing so is coming under increasing pressure as the Iran war, high borrowing costs and a powerful El Niño combine to strain public finances. Global fuel subsidies and other relief measures could cost more than $1 trillion this year, according to a United Nations Development Programme study.
The pressure comes as oil trades near $100 a barrel and governments face growing demands to soften the impact of higher fuel, electricity and food prices. The UNDP warned that the next few months could prove particularly difficult for countries relying on price caps, subsidies and tax rebates, especially as elevated interest rates make it more expensive for governments to borrow.
The number of countries introducing different forms of relief nearly doubled between April and September as the impact of the Iran war spread through energy markets. Without those measures, an additional 130 million people could have fallen below the poverty line of $6.85 a day this year, according to the UNDP analysis, which drew on data from the World Bank, International Monetary Fund and International Energy Agency.
The combined pressure may not have peaked yet. UNDP expects the shocks to intensify into early 2027 as this year’s El Niño brings a greater risk of droughts and floods, potentially worsening food insecurity at a time when consumers are already dealing with expensive energy.
Higher energy prices contributed to protests and social unrest in at least 10 countries in September, including Syria, Guatemala, the Philippines, France and Portugal. A separate survey of 26 UNDP offices found that 25 expected the Middle East crisis to remain as important or become an even greater priority over the next six months.
Asia Faces Tighter Fuel Supplies
The strain is becoming particularly visible in Asia, where China’s suspension of oil-product exports in October to destinations outside Hong Kong and Macau threatens to tighten regional supplies. Singapore, Malaysia and Australia are among the major buyers that could be affected.
Expectations of fewer Chinese shipments have already pushed Asian gasoline refining margins to a record of more than $50 a barrel over Brent crude. Prices for near-term deliveries of gasoil and jet fuel have also strengthened relative to later months, reflecting concerns over immediate supply.
Singapore is particularly exposed to changes in Chinese gasoline flows because it is China’s largest overseas buyer. The city-state imported 1.772 million metric tons, or about 14.97 million barrels, of Chinese gasoline in the first nine months of this year. That was already 62% below the total for all of 2025, while Singapore’s light-distillate inventories have fallen to their lowest level in five years.
Singapore also plays an important role as a regional trading hub, where gasoline is blended before being re-exported, with Indonesia the biggest destination. It is also China’s largest diesel buyer after Hong Kong. A prolonged reduction in Chinese exports could therefore have effects beyond Singapore itself.
Australia is China’s second-largest importer of jet fuel this year after Hong Kong, followed by Vietnam, Japan and Malaysia. However, Australia said its fuel inventories remained within normal levels, with 42 days of petrol and 29 days of jet fuel available. Forty-five ships were also heading to the country, carrying part of 3.5 billion litres of fuel scheduled for delivery over the following four weeks.
Even countries that are not heavily dependent on China could feel the impact. With fewer Chinese barrels entering the wider market, buyers may have to compete for alternative supplies, putting further upward pressure on prices.
Europe Weighs Another Emergency Release
Europe is facing a similar squeeze, particularly in diesel. European Union governments discussed a French proposal to release 50 million barrels of diesel, alongside another 50 million barrels of crude oil from International Energy Agency members, as governments look for ways to cool fuel prices.
Global diesel supplies have been hit from several directions. The Iran war has disrupted Middle East supplies, Russia has restricted exports after Ukrainian attacks damaged a few of its refineries, while Chinese refiners have suspended October fuel exports to build domestic inventories.
The latest discussions come after IEA members carried out an unprecedented coordinated release of about 400 million barrels from strategic oil reserves in March to address supply disruptions caused by the Iran war, while Germany and France could play a particularly important role in any further European action as they together hold about 35% of the EU’s strategic diesel reserves.
The challenge for governments is that fuel subsidies, tax cuts and emergency stock releases can soften the immediate impact on consumers but cannot indefinitely offset a prolonged shortage. With oil prices still elevated, Asian supplies tightening and governments already carrying expensive debt, the UNDP said the coming months will test how long countries can continue cushioning households from the global energy shock.
