Page 17 - FIPI - Policy & Economic Report May 2026

POLICY AND ECONOMIC REPORT
OIL & GAS MARKET

The S&P Global Materials Price Index rose sharply during the period, indicating broad-based increases in
prices of raw materials, shipping, and industrial commodities. Commodity price pressures extended
beyond crude oil into metals, industrial inputs, and logistics costs, impacting manufacturing profitability
and global trade competitiveness.

Higher energy prices also intensified concerns regarding energy security and affordability across several
advanced and developing economies. Energy-intensive industries in Europe were particularly impacted by
rising fuel and electricity costs, contributing to weakening industrial activity and slowing economic
growth.

Global Energy Security and Supply Risks

Global energy markets remained highly sensitive to geopolitical developments during May 2026,
particularly around the Strait of Hormuz, one of the world’s most critical energy transit chokepoints.
Renewed optimism regarding the reopening and stabilization of shipping activity through the Strait
contributed to a decline in international oil prices, highlighting the significant influence of maritime energy
routes on global commodity markets and inflation expectations.

The Strait of Hormuz remains strategically important for global energy trade, handling nearly one-fifth of
global crude oil shipments and a substantial share of LNG exports. Concerns over potential disruptions
had earlier intensified fears of supply shortages, contributing to elevated crude oil prices and increased
volatility in energy markets. The easing of immediate supply concerns helped moderate risk premiums in
crude prices during May 2026.

The incident underscored the continued vulnerability of global energy supply chains to geopolitical
developments and maritime disruptions. Higher energy prices and uncertainty surrounding supply
availability have added to inflationary pressures globally while also impacting industrial input costs, freight
charges, and trade flows.

Energy-importing economies, particularly in Asia, remain highly exposed to disruptions in Gulf energy
supplies due to their dependence on crude oil and LNG imports routed through the Strait. This has
reinforced the importance of energy diversification, strategic reserves, and supply chain resilience in
ensuring long-term energy security.

Implications for Energy-Importing Asian Economies

Energy-importing Asian economies remained particularly vulnerable to volatility in global energy markets
during May 2026 due to their high dependence on crude oil and LNG imports from the Gulf region.
Countries such as India, China, Japan, and South Korea continue to rely heavily on energy supplies routed
through the Strait of Hormuz.

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