UN says fuel subsidies may top US$1 trillion as Iran war drags on

The United Nations Development Programme (UNDP) has warned that governments around the world are struggling to shield consumers from soaring energy prices due to the ongoing Iran war and other crises, with fuel subsidies potentially costing more than $1 trillion this year. The UNDP's annual report, released Friday, highlights the growing challenges governments face as borrowing costs rise and the impending El Niño phenomenon, expected to be the strongest on record, exacerbates the situation.

The agency's chief economist, George Gray Molina, noted that the horizon over the next few weeks and months is uncertain, as the interconnected crises of the Iran war, borrowing costs, and El Niño leave little clear path forward. Between April and September, the number of countries deploying relief measures nearly doubled, driven by the war's impact on oil prices and global borrowing costs.

If countries had not provided relief, an additional 130 million individuals could have slipped below the $6.85-a-day poverty line this year. The UNDP projects that the combined shocks from the Iran war, El Niño, and other crises will peak in early 2027, with the Middle East crisis likely to remain or intensify in the coming months.