Taiwan’s economy unlikely to be severely impacted by war in Iran, experts say

While the war between the US and Iran has rattled global energy markets, experts say Taiwan’s diversified energy sourcing and existing supply buffers are likely to shield the island from severe economic disruption in the near term.

Escalating geopolitical strains and market ripples

The US-Iran war that erupted on Feb. 28 has rapidly reverberated through global energy markets. Brent crude prices soared to multi-month highs.

According to CNBC, sustained disruption could push prices toward US$100 or even US$120 per barrel if hostilities endure or the Strait of Hormuz is effectively choked off.

The strait, a maritime artery for about 20% of the world’s oil and liquefied natural gas (LNG) shipments, has seen heightened risk, with insurers withdrawing coverage and some tanker traffic rerouting to avoid escalating violence.

The Guardian's head of business, John Collingridge, said on the outlet’s podcast that beyond oil, the prices of fertilizer and plastic would also rise. He added yet another ramification: People would begin to rely more heavily on burning coal when gas is in short supply.

For emerging Asian markets such as Taiwan, these developments inject uncertainty into energy cost projections and macroeconomic balances, as supply chains and commodity prices are hugely affected by global crude benchmarks.

Taiwan’s market reactions after the conflict

For all the upheaval abroad, CPC Corporation, Taiwan’s state-owned petroleum company and the leading dominant enterprise in the local energy sector, maintained that crude oil and LNG supplies from the Middle East continue on schedule, underscoring that domestic inventories remain secure.

CPC further stated that in recent years, it has deliberately reduced reliance on Persian Gulf crude — from 45% in 2022 to just below 35% in 2025 — while increasing imports from the Americas, Europe, Africa, and Australia. US crude now accounts for nearly 62% of the company’s imports, up from 44% just three years ago.

In addition, the Ministry of Economic Affairs (MOEA) said it has activated an emergency response task force effective Mar. 2, bringing together relevant agencies such as the Energy Administration, a government agency under MOEA, and Taiwan’s two major energy providers, CPC and Taipower, Taiwan's state-owned power utility.

The group is holding daily coordination meetings to exchange information, closely monitor developments in energy supply, and provide timely public briefings as needed.

Beginning Monday (Mar. 2), retail fuel prices in Taiwan were adjusted upward, with gasoline rising by NT$0.2 (about US$0.01) per liter and diesel by NT$0.4 per liter.

However, CPC said it has absorbed NT$1.4 per liter of the gasoline cost increase and NT$0.4 per liter for diesel, a move aimed at cushioning domestic consumers and keeping fuel prices below those in neighboring Asian markets.

Taiwan’s retail fuel prices are adjusted every week. On Monday (Mar. 9), there will be another price change but the specifics have yet to be disclosed.

At the same time, Taiwan’s broader financial markets have already shown signs of recovery: The TAIEX index surged more than 840 points on Thursday (Mar. 5) after a previous plunge of more than 700 points on Tuesday.

Shipping stocks moved differently from the broader index. Shares of Yang Ming Marine Transport, Evergreen Marine, and Wan Hai Lines surged in the days after the war began, then fell as the TAIEX rebounded.

On Mar. 3, the three stocks rose 26.44%, 16.40%, and 13.87% respectively, but all three of them fell on both Mar. 4 and Mar. 5.

Why Taiwan may not be severely impacted economically

Liu Yen-ting (劉燕婷), an expert on the Middle East, told TCN that Taiwan has virtually no official or commercial interaction with Iran, largely because Tehran remains under extensive US sanctions.

She said that prior to 2018 — when sanctions were eased due to the Joint Comprehensive Plan of Action (JCPOA) — a handful of Taiwanese companies explored the possibility of entering the Iranian market. Yet even then, meaningful commercial engagement proved difficult, and such attempts have largely vanished since sanctions were re-imposed.

Instead, Taiwan’s stronger Middle East ties tend to be with countries aligned with Washington. Liu explained that US regional strategy has long rested on two principal pillars: Israel and the Gulf Cooperation Council (GCC) countries. These oil-producing Gulf states maintain close political and security relations with the United States and, for both economic and political reasons, interact more frequently with Taiwan than Iran does, she said.

Liu said Iranian attacks targeting GCC energy facilities could impair oil production capacity and push up prices. She added that attacks on shipping could congest the Strait of Hormuz — preventing tankers from leaving the Gulf — and drive price increases globally.

Beyond crude oil, Liu stated that the effects may also extend to LNG markets. LNG is typically traded under long-term contracts, but wartime disruptions often force buyers into the spot market, where supply shortages quickly generate steep price premiums.

Liu said the immediate effect for Taiwan is likely to appear in higher import costs and potential inflationary pressure, including possible increases in electricity. However, she emphasized that the market shock is still milder than the surge seen after Russian invasion of Ukraine, partly because global strategic reserves are larger and crude supply capacity in 2025 has been relatively abundant.

She stated that for Taiwan, the near-term outcome may therefore be rising prices rather than an outright shortage. DigiTimes concurred that the conflict in the Middle East is unlikely to disrupt the island's short-term oil and gas supply.

On British broadcast Channel 4 News, Professor Mohammad Marandi from the University of Tehran confirmed that Iran has targeted American assets in Gulf countries and warned oil tankers not to leave the Strait of Hormuz. He also said that Iran does not take responsibility for the attacks on energy facilities in Saudi Arabia.

War trajectory: How long will it last

Liu pointed out that both the US and Iran have adopted a defiant posture suggesting readiness for sustained confrontation. Yet several constraints may discourage a drawn-out campaign by the United States, including the stakes of military casualties, domestic inflation, and electoral pressures from the Republican base.

Liu said that meanwhile, Iran has lost several senior figures but appears to retain operational capability, with hardline factions quickly filling leadership positions. These dynamics make the duration of the conflict difficult to predict.

Information from within Iran remains difficult to verify, Liu added. Media outlets linked to the Islamic Revolutionary Guard Corps (IRGC) often present one narrative, while opposition-aligned sources provide another. In such an environment, Liu advised observers to cross-reference reporting from multiple news organizations and avoid becoming trapped in strongly partisan interpretations.

“Cognitive warfare, psyop and disinformation campaign are all by nature a part of the war,” Liu said. She also recommended that investors and other readers track broader strategic trends and verified developments to understand the conflict’s trajectory, rather than being bogged down in the details.

NYU-trained global affairs commentator Chao Chun-shuo (趙君朔) told TCN that Washington appears to envision a relatively short campaign lasting weeks rather than years. While the possibility of ground forces has not been ruled out by US President Donald Trump, local partners — particularly Kurdish fighters — could shoulder much of the ground combat role.

If the campaign remains limited, Chao said, the United States is unlikely to become trapped in a prolonged conflict similar to its earlier wars in Iraq and Afghanistan. Instead, after replenishing expended precision munitions, Washington could rapidly redirect its strategic focus back to the Indo-Pacific.

However, Chao added that the goal of the joint military operations of the United States and Israel is to severely dismantle Iran’s military capabilities, including its ballistic missile arsenal and suspected nuclear facilities. He said that the two nations seemed to be resolute in hitting Iran hard and knocking down its ability to further support its proxies in the Middle East once and for all.