Asia-Pacific Governments Take Measures as U.S.-Israel War With Iran Pressures Markets

A growing number of governments in the Asia-Pacific region are taking urgent steps to stabilize financial markets and support liquidity, as the U.S.-Israeli war with Iran intensifies, adding pressure on currencies and fueling broader market volatility.

South Korea

South Korea will conduct a 5 trillion won ($3.32 billion) emergency bond buyback to boost liquidity in the local bond market and cap rising yields. Three-year treasury bond yields recently hit their highest level since mid-2024.

The government has also expanded fuel tax cuts and is drafting a 25 trillion won supplementary budget that may include cash vouchers for consumers and financial aid for companies. The finance ministry aims to submit the budget to Parliament by the end of March.

Japan

Japan is tapping 800 billion yen ($5 billion) in reserve funds to finance subsidies to keep gasoline prices near 170 yen per liter on average, costing up to 300 billion yen per month.

Authorities are also considering intervention in crude oil futures as the Middle East conflict drives energy prices higher.

Philippines

The Bangko Sentral ng Pilipinas held a surprise off-schedule policy review on March 26 to reassure markets that it is monitoring the situation closely.

The central bank kept its key policy rate at 4.25% but indicated readiness to act if inflation expectations shift.

Australia

Australia has so far made limited policy changes, focusing mainly on securing imports of petrol and diesel amid shortages caused by panic buying.

Prime Minister Anthony Albanese will meet state premiers and chief ministers next week to develop a plan to manage the fuel crisis, expected to continue for months. The government is considering voluntary measures to reduce demand, including encouraging remote work, but is not yet implementing fuel rationing.

The 2026/27 Budget will be announced in May, with pressure to cut spending while balancing calls for energy relief, such as fuel tax cuts and direct household support. Proposals to tax “excess” profits of gas companies are also under discussion.

Australia’s central bank remains focused on inflation, having raised interest rates twice this year to 4.10%, with another hike possible in May.

New Zealand

New Zealand has temporarily aligned its fuel standards with Australia to increase import options and will provide weekly support of NZ$50 ($29.30) starting in April for low-income households to offset higher costs.

The government updated its National Fuel Plan, outlining four response phases for petrol, diesel, and jet fuel. Measures range from monitoring supply and promoting voluntary fuel savings to prioritizing fuel for emergency services, freight, food supply chains, and key industries in more severe scenarios.

-Reporting by Brenda Goh in Seoul, Makiko Yamazaki in Tokyo, Praveen Menon in Sydney, and Lucy Craymer in Wellington; Editing by Sumeet Chatterjee and Thomas Derpinghaus/Reuters