Asian Fuel Relief Hopes Ride on U.S. Midterm Results

Asia has been hit especially hard by the fallout from the U.S. and Israeli offensive against Iran, which began on February 28. The Middle East is the region’s leading supplier of hydrocarbons, and the loss of much of that supply for an extended period has forced Asian countries to seek alternatives at higher prices.

The disruption has driven inflation and increased government spending intended to protect economies. Last month, the World Bank warned that the crisis was straining Asia’s finances. Subsidies have been the most common response among emerging and developing economies, the bank said. They have generally limited retail gasoline price increases, but have had a weaker effect on overall inflation.

Democrats now hold 240 seats in the House, compared with 147 for Republicans, and 54 in the Senate, compared with 44 for Republicans. Reuters columnist Clyde Russell wrote that Democrats could use congressional control to redirect, cut or increase government spending, and launch investigations into Trump, his close allies and family members. Whether those powers could bring down Asian diesel prices is uncertain.

Some observers expect Democrats to increase support for Ukraine at the expense of the Iran war. That could mean more Ukrainian drone attacks on Russian refineries, while leaving Iran unconvinced that lasting peace with the United States is possible. Any effect on fuel prices in Asia may therefore be limited.

Oil prices fell below $100 on Wednesday after the midterm results, suggesting traders were anticipating an end to hostilities. But geopolitical analysts have warned that Trump could respond to the election setback by escalating against Iran; some Middle East analysts cited by Reuters said escalation might be his only way to save face.

Asian economies are unlikely to receive quick relief, and forecasts for the region’s growth have already been revised amid recession concerns. The continent has been a major engine of developing-world growth, but the war has clouded that outlook. Hopes for a shift in U.S. policy are understandable, though they may prove premature.