Oil prices rise, prompting urgent focus on strategic reserves and energy diplomacy

Oil price volatility in early 2026, driven by the intensification of the Middle East conflict, is sending shockwaves through the global energy supply chain with direct and broad implications for Vietnam’s economy. At the conference "Geopolitical Shifts and Energy Security Strategy" held on 9 April 2026, experts warned that Vietnam faces a "double shock" from energy costs and domestic structural constraints, requiring urgent contingency plans. Pressure on Vietnam’s economy and supply chains: Dr. Ha Huy Ngoc, Director of the Center for Strategy and Policy at the Vietnam Institute of Economics and World, said the Middle East conflict is no longer a regional issue but has become the most sensitive variable in global energy markets. Brent crude has swung wildly, hitting 115.6 USD per barrel in early March 2026, up nearly 100% from the start of the year. Although countries have tried to release strategic reserves to cool prices, tensions in the conflict pushed prices higher again soon after. According to Dr. Ngoc, global investor sentiment is dominated by fear that the war could escalate and especially the risk of the Hormuz Strait being blocked. Hormuz accounts for about 20% of global oil and LNG shipments. The spillover effects extend beyond energy to financial markets. The USD has strengthened as investors sought safe-haven assets, while gold fluctuated sharply, rising to around 5,400 USD per ounce as the conflict erupted before retreating as the USD strengthened. For Vietnam, an open economy, these fluctuations create tremendous pressures. Ngoc notes that domestic gasoline prices surged in March 2026. By 31 March, E5 RON92 gasoline rose by 4,703 dong per liter and Diesel by more than 17,000 dong per liter versus February—an abnormal increase breaking the pattern of 4-8% increases over the two preceding years. This price rise cascaded into production and transport costs. Bitumen prices surged nearly 32%; cement, steel, bricks and other construction materials rose from 2% to over 23%, directly affecting project costs, especially for key transport infrastructure. If energy prices double versus February 2026, project cost estimates could rise by up to 15.82%, imposing a heavy burden on the state budget. The discussion also highlighted broader trade and logistics implications. Transportation and storage costs are rising, threatening margins for export-oriented agricultural and seafood sectors to the Middle East while dampening domestic demand as households tighten spending. From a macro perspective, Le Xuan Nghia noted that beyond external shocks, Vietnam faces domestic issues such as an "interest rate paradox." Inflation is around 3.3%, yet bank lending rates commonly rise to 14-15%. Three main causes behind this: capital mobilization for public investment; government-led infrastructure spending drawing on banking-system liquidity; new tax regulations affecting household businesses prompting withdrawals of savings; and a misperception of real estate values. Real estate, with capitalization nearly three times GDP, drives many sectors, but excessive credit in this area may dampen the broader economic rebound. Policy responses and strategic recommendations include the urgent need to develop response scenarios, diversify supply sources, and accelerate the construction of a national strategic crude oil reserve at Nghi Son. Vietnam still imports about 45.6% of its fuel needs, with a large share from the Middle East. LNG is heavily dependent on imports from Qatar and Saudi Arabia. Therefore, establishing an energy diplomacy akin to vaccine diplomacy is essential to ensure a sustainable supply. Additionally, accelerating the use of biofuels E5 and E10 would help reduce pressure on gasoline and oil, lower emissions versus traditional mineral fuels, support the biofuel sector, and stabilize rural production while reducing import dependence on fossil fuels. Today, E10, E15, E20 or higher are widely used in many countries such as the US, Brazil, Europe, China, and Thailand. There were also policy proposals to mobilize idle funds from off-budget financial resources to supplement the Fuel Stabilization Fund to cushion volatility should prices remain elevated, without distorting the market. Representatives urged the government to extend tax relief on special consumption tax, environmental tax, and VAT for gasoline and oil in line with international price movements to reduce costs for transport and manufacturing. To maintain energy security, temporary grid connections for completed solar and wind projects awaiting connection were suggested to bolster national energy supply in case of disruptions in gas or coal supply due to Gulf war and rising shipping costs. Xung đột tại Trung Đông tác động mạnh đến logistics Việt Nam. The section highlights the broader implications on logistics and energy pricing, including potential price spikes and policy responses to stabilize supply.