On Thursday, June 12, 2025, Israel hit Southern Iran, striking Tehran’s district and targeting the Natanz nuclear facility about 225km south of Tehran, hours after the Israel Defence Force issued an evacuation warning to the citizens[1]. The military operation called “Operation Roaring Lion” was launched by Isreal as a concern of national security by Israel due to the recent development of Iran’s nuclear weapon. Israel mentions Iran has almost reached its final stage of development and poses an existential threat to them. Although Iran continues to mention that its nuclear program is for peaceful civilian use, Israel claims that recent intelligence reveals the program is nearing the stage of developing nuclear weapons.

As a retaliation, Iran launched ballistic missile attacks on military centres and air bases in Israel. Iran referred to this counterstrike as “True Promise 3” as a response to what it considers a declaration of war.

A full-scale war has taken place with other groups supported by Iran, such as Houthis in Yemen, firing at Israel. The situation worsened when the United States entered the conflict launching airstrikes on Iranian nuclear sites including Fordow, Isfahan, and Natanz. The Iran-Israel war has resulted in over 500 confirmed deaths in Iran, while at least 24 civilians have been killed in Israel and hundreds more wounded and also severe damage to infrastructure in both countries, and growing fears of a broader regional conflict.[2]

As of 24 June, 2025 Iranian-backed militias in Iraq have launched attacks near U.S. military bases in Erbil and at the same time Israeli forces have reportedly stepped up their operations in Syria, targeting weapons believed to be headed for Hezbollah. Meanwhile, the US president has announced in social media post regarding the agreement of Israel-Iran to a ceasefire.[3]

The strikes, along with other infrastructures, have had an impact on energy infrastructure as well. It is reported that Israeli drones have shot one of the largest natural gas fields in the world- South Pars gas field targeting two major gas processing facilities. Iran has similarly responded with missile strikes on an oil refinery in Haifa, signalling that energy assets are now active targets in the conflict.[4] Amidst the war, Iran has threatened to close the Strait of Hormuz which is a narrow waterway through which nearly 20% of the world's oil supply flows daily and stands as the world’s most critical chokepoint for oil and gas.

South Asia’s Dependence on Middle Eastern Oil

The lifeline to Fossil fuels in South Asia is dependent on different nations, especially ones in the Middle East.  Where Pakistan depends entirely on Middle East to meet its energy needs. Other countries though slightly more diversified still depend heavily on the region. India relies heavily on oil from Russia and the Middle East. India plays a central role in South Asia petroleum  supply especially for landlocked nations like Nepal and Bhutan which are entirely dependent on India which itself is deeply tied to Russia and Gulf oil. Sri Lanka and Bangladesh import from both the Middle East and India or China. Despite various partners, the Middle East remains the central lifeline for oil, leaving the entire region exposed to price shocks and inflation risks.

While India has taken some measures to diversify the oil supply most other countries don’t have the alternative and would face a serious risk if the situation worsens. India has increased its oil import from Russia,[5] reducing the dependence from the Middle East. For the short term, this strategy will help India to avoid price volatility and maintain a stable energy supply. But just like the rest of the world, India isn’t totally independent of Middle East countries for its energy needs. India’s dependence on Strait of Hormuz is substantial, with 40 per cent of its oil imports and half of its gas requirement passing through it.[6] So, any kind of disruption on this maritime route be it either conflict or closure would have consequences on India’s energy security and regional supply chain and inflations. Increasing import from Russia gives a short-term relief but can't fully substitute the Middle East oil supply. 

Impact on Nepal

Under the bilateral agreement, Nepal imports 100% its petroleum products from Indian Oil Corporation.[7] Hence Nepal is directly exposed to India's fuel dynamics. Any impact India faces due to the middle east conflict, so does Nepal.

The most immediate effect would be on the petroleum supply of the region. The global oil price, if the situation continues and the threats by Iran come to action, it would inflate the oil prices, along with the fuel shortages throughout the world. In just a few days, driven by conflict, price of Brent crude oil climbed from around $70.8/barrel to $75 by June 16 marking a gain of approximately 6%.[8]

Nepal’s petrol price as of mid-June 2025 stands as NPR 157.5 per litre, which in mid-May was NPR 154.5 showing a 2% increase.[9] Though the recent trends in fuel price in Nepal is increasing. Nepal, as of now, hasn't experienced any fuel surge due to global oil volatility mainly as India imports from Russia. However, if the conflict worsens and India’s dependence on the Middle East starts having an impact, Nepal will also face the same fate as the rest of the nations.

From powering factories to irrigation for farms to keep the basic transportation available we are deeply tied to fossil fuel. Any disruption in the regular supply would hit us the hardest. The transportation sector would be the first to see the surge, as transportation costs increase so will the price of goods and services that depend on road-based logistics.  Similarly, in the sector of agriculture we need diesel to power irrigation pumps, as the input price increases it could result in reducing crop yields and increasing food prices. 

The manufacturing sector in Nepal , which is largely energy intensive, would have a rise in production cost , leading to a rise in price that will eventually passed on to the consumers. As the price goes up, it would lead to inflation.

Conclusion

Now depending on how the situation unfolds in future there can be the following three cases-

In the best case scenario we expect the situation to de-escalate as soon as possible through mediation and diplomatic efforts. The US president resident Donald Trump has called for a ceasefire[10], if this diplomatic momentum succeeds, tensions could ease significantly, the energy market will stabilize, preventing any further escalation.

If the situation carries on, and Iran further retaliates by attacking more U.S. military bases in the Middle East, it would destabilize the entire region. There would be price volatility slowly building up to fuel shortages and moderate inflation. Nations will witness rising costs, but there would be no full-blown crisis. Also, due to India’s imports from Russia, the shortage won’t affect Nepal in the short run.

Considering the worst case scenario, where the situation worsens and as a strategy Iran’s parliament formally passes a motion authorizing the to block the Strait of Hormuz[11] , this would  choke off nearly 20% of global oil supply, the world would face an intense fuel shortage, hyperinflation leading to economic slowdown. As India starts getting affected by the world’s inflation, Nepal along with other imports would import inflation from India as well. This might even lead to an increase in regional tension further destabilizing the global peace.

This crisis also serves as an important lesson for South Asia to reduce the vulnerability to global fossil fuel. Nepal is actively transitioning into clean energy, with the increasing adoption of electrical vehicles and the use of hydropower as primary energy source, it is moving towards its goal of  becoming net-zero by 2045.[12] This transition is much needed across South Asia. The South Asian countries must invest in renewable sources as long-term alternatives.  Similarly, there is a need for regional cooperation. The South Asian Countries should collaborate to explore alternative supply routes as a means of greater energy security.

Not only the fossil fuels, the recent events if continued will also result in remittance shock. Nepali migrants are employed in Israel, though less in number and many gulf-countries, maximum number. After the Iran’s attack on Doha’s US military base, Middle East countries have closed their airspace temporary. The current situation due to its risk discourages the new labour migration, and the impact of lesser migrant workers would be seen in the remittance inflow of Nepal next year.  

Despite the ceasefire, the chief of the General Staff of Israel Defence Force has accused Iran of violating it and firing missiles at Israel.

"In light of the severe violation of the ceasefire carried out by the Iranian regime, we will respond with force," Eyal Zamir is quoted as saying in a post on X by the Israel Defence Force[13], indicating the peace talks may not last long.

The views expressed above belong to the author.