Pacific Island Countries Are Highly Vulnerable to Oil Supply and Pricing

Published April 2, 2026

Despite their geographic distance from the Middle East, the closure of the Strait of Hormuz is having significant impacts on the Pacific Island countries, which are highly vulnerable to both oil pricing and supply.

Pacific Island countries are highly vulnerable to disruptions in the oil sector due to their lack of domestic production and limited storage capacity. Oil supplies around 80% of the Pacific’s total energy, with some countries relying on it for as much as 98%. Most refined fuel in the Pacific comes from Singapore, Korea, and Japan, with some estimates reporting as much as 80% of the crude oil processed in these refineries passing through the Strait of Hormuz.
Pacific island nations spend roughly 5%-15% of GDP on net oil and gas imports, thus increasing oil prices combined with heavy oil dependency exacerbate already fragile economies and have the potential to massively increase national debt distress risks across the Pacific. Papua New Guinea stands as an exception thanks to its role as a net exporter of liquified natural gas (LNG), where rising prices are poised to boost government revenue and planned LNG projects can become more attractive.
The oil crisis will also drive further economic disruption across other critical sectors in the Pacific. Fuel intensive sectors such as agriculture and farming will be severely impacted as one third of the world’s seaborn fertilizer trade goes through the Strait of Hormuz. The transportation and tourism sectors are likely to suffer due to the cancelation of flights due to rising fuel costs. The fishing industry, a major source of food security and household income, will also be impacted by fuel shortages.

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