Sri Lanka raised fuel prices by 25 per cent on Sunday, the second increase in two weeks, as the country prepared for more impact from the war in the Middle East.

Regular petrol was increased to 398 rupees ($1.30) per litre, up from 317 rupees, while diesel, the fuel commonly used for public transport, rose by 79 rupees to 382.

Last week, the government ordered an eight per cent increase in retail fuel prices and introduced rationing to limit consumption.

“We hope to achieve a 15 to 20pc reduction in fuel consumption with the latest increase,” an official at the Ceylon Petroleum Corporation said.

He said President Anura Kumara Dissanayake told them last week that the country must prepare for a prolonged conflict in the Middle East that could affect the island’s energy supplies.

The president ordered a four-day working week from last Wednesday and asked employers to reintroduce work-from-home arrangements where possible.

The Strait of Hormuz, a key waterway through which some 20pc of global oil exports pass in peacetime, has been effectively closed by Iran following the US and Israeli war against it, now entering its fourth week.

Sri Lanka imports all of its oil and also buys coal for electricity generation.

Sri Lanka buys refined petroleum products from Singapore, Malaysia and South Korea, while crude oil for its Iran-built refinery is sourced from the Middle East.

The government has warned that the fighting in the Middle East, and a prolonged war, could seriously undermine its efforts to emerge from the economic meltdown of 2022.

Sri Lanka defaulted on its $46 billion foreign debt in 2022 after the country ran out of foreign exchange. Since then, Colombo has secured a $2.9 billion bailout from the International Monetary Fund.s