Governments across the world are facing increasing difficulty in shielding consumers from higher energy costs as the Iran war and other crises put pressure on public finances, according to a United Nations Development Programme (UNDP) study.
According to a report by Bloomberg, the study said fuel subsidies could cost more than $1 trillion this year, while measures aimed at containing food and energy prices are becoming harder to maintain amid higher borrowing costs and the prospect of an exceptionally strong El Niño.
Subsidies face growing fiscal pressure
The UNDP said the coming weeks and months would be particularly important for governments that have introduced price controls, subsidies and tax reductions to limit the impact of higher energy costs.
UNDP chief economist George Gray Molina said the global economy was facing uncertainty from three simultaneous pressures: the Iran war, elevated borrowing costs and El Niño.
The UNDP analysis, based on data from the World Bank, International Monetary Fund and International Energy Agency, found that the number of countries using various relief measures nearly doubled between April and September as the impact of the conflict spread.
Without such support, another 130 million people could have fallen below the $6.85-a-day poverty threshold this year, the report estimated.
El Niño adds to food security risks
The pressure could intensify in early 2027 as the combined effects of energy, financial and weather-related shocks are expected to reach their peak.
El Niño, associated with unusually warm ocean temperatures, can disrupt weather patterns and increase the risk of floods and droughts, potentially worsening food insecurity.
Higher energy prices have already been linked to protests and social unrest. The UNDP said such unrest was recorded in at least 10 countries in September, including Syria, Guatemala, the Philippines, France and Portugal.
A separate UNDP survey covering 26 country offices also highlighted the continuing risks. Twenty-five offices expected the Middle East crisis to remain or become a greater priority over the next six months, while all respondents anticipated further deterioration before conditions improve.
The findings underline the difficulty governments face in maintaining consumer support measures while managing rising borrowing costs, energy prices and potential food-supply disruptions.
