In the structure of the global economy, the Middle East has long been likened to the “heart” of the energy market. As a result, any geopolitical upheaval or military conflict in the region immediately triggers chain reactions in global oil prices. The current conflict is not merely about gunfire; it also marks the beginning of a new cycle of fuel price volatility, directly threatening the stability of production costs and inflation indicators in many countries, including Vietnam.
The surge in fuel prices caused by the U.S.-Israel war effort against Iran is not simply a matter of localized supply disruption. From an economic perspective, it reflects a combination of negative expectations in financial markets and real disruptions in key maritime shipping routes. When input costs for transportation and manufacturing soar, the ripple effects inevitably reach the daily lives of ordinary people, affecting even the most basic necessities. Policymakers are therefore confronted with a difficult challenge: how to shield the economy from the headwinds blowing from the Gulf region.
An analysis of data from recent fuel price adjustments (March 5 and March 7, 2026) presents a worrying picture. The cumulative increase in gasoline prices exceeded 32%, while diesel prices rose by about 63%. These represent extremely large input cost shocks. It should be noted that within the intermediate costs of the economy, diesel functions as the “lifeblood” that powers transportation systems and industrial machinery.
Based on calculations from the Input-Output Table, if prices of gasoline and diesel used in production were to increase by 60%, the quantitative consequences would be clear. GDP could decline by approximately 3.33%. The sectors most directly and severely affected would be transportation and logistics. If businesses are forced to pass these costs on to product prices, the Producer Price Index (PPI) could rise by about 1.27%. However, before reaching final consumers, production prices must pass through circulation and trade stages. Because transportation costs have risen sharply, the Consumer Price Index (CPI) could increase by roughly 3%. More concerning is that in subsequent production cycles, when other intermediate costs adjust in line with higher energy prices, this index could climb even further, creating a cost-push inflation spiral.
The current rise in fuel prices may not be the end of the story. Prices could increase further if the conflict in the Middle East continues. In that context, the way fuel taxes are managed needs to be reconsidered. At present, the price structure of petroleum products is affected by multiple taxes, including import duty (recently reduced to 0% for certain products), special consumption tax, value-added tax, and environmental protection tax.
The “tax-on-tax” effect has unintentionally inflated input costs across the entire economy. The transportation sector in particular has suffered deep losses due to the nature of its market structure, as companies cannot fully pass on rising costs to consumers. When profit margins are eroded, businesses are forced to cut back operations, leading to production slowdowns. To stabilize prices and support the economy, in addition to urgently reviewing the current tax framework, the state budget—which receives significant revenue from crude oil exports—should consider using part of this income to directly subsidize fuel products, thereby easing pressure on downstream industries.
However, rising fuel prices are not the only concern. A more serious potential threat lies in supply disruptions if the Middle East conflict drags on. We must recognize a structural reality: the stability of Vietnam’s economy depends significantly on the Nghi Son Refinery and Petrochemical Complex.
Currently, this refinery relies on imported crude oil from Kuwait as its primary input. If geopolitical tensions disrupt key maritime routes in the Middle East, crude oil imports could be interrupted, leading to a serious oil shortage for both industrial production and essential daily consumption. At that point, the question will no longer be how high fuel prices may rise, but whether sufficient supply will exist to keep the economy running.
This represents a critical vulnerability in energy security that deserves particular attention. Dependence on a single supply source for a major refinery constitutes a systemic risk that policymakers must prepare for with urgent contingency plans. In structural economics, one weak link can bring down an entire operating system.
The war in the Middle East is not merely a military issue; it is a macroeconomic variable capable of altering Vietnam’s growth trajectory. Vietnam cannot simply wait passively for global oil prices to cool. Instead, proactive measures are needed: diversifying crude oil supply sources to reduce dependence on geopolitically unstable regions; restructuring energy tax policies to minimize the tax-on-tax effect; and establishing flexible subsidy mechanisms funded by revenues from crude oil exports.
Energy security is not just about having enough fuel to fill a tank; it is about ensuring the autonomy and resilience of an entire production system in the face of external shocks. Only by addressing these structural challenges can Vietnam’s economy remain resilient against the headwinds blowing from the Gulf region.
