The ongoing escalation of conflict in the Middle East has cast a long shadow over economic prospects for developing economies across the Asia-Pacific, prompting the Asian Development Bank (ADB) to downgrade its 2026 growth forecast and warn of rising inflationary pressure, according to the bank’s flagship annual publication, the *Asian Development Outlook (ADO)*, released on 11 April 2026.
The ripple effects of the regional crisis have already disrupted global energy markets, pushing international crude prices above $100 per barrel in recent weeks. As of Friday, the global benchmark Brent crude traded above $96 per barrel, driven by supply uncertainty tied to the conflict. The situation worsened earlier this week, when Iran’s state-run Press TV reported the full closure of the Strait of Hormuz, the strategic maritime chokepoint through which roughly a third of global oil and gas exports flow, most bound for Asia-Pacific markets.
In a webinar launching the ADO report, ADB principal economist John Beirne explained that the vast majority of developing Asian economies rely on net energy imports from Gulf nations, meaning sustained higher energy prices will translate into direct, material income losses for the region. But the spillover impacts stretch far beyond energy and shipping, he noted, extending to core inputs for agricultural and industrial supply chains that also pass through the Strait of Hormuz. Middle Eastern economies are leading global suppliers of critical commodities including petrochemicals, fertilizers, industrial gases and base metals, all of which have seen upward price pressure amid the supply disruption.
“High fertilizer and diesel prices raise agricultural costs, which could lead to less input use and lower yields next year, and this could contribute to food insecurity,” Beirne warned.
ADB economists emphasized that the severity of the conflict’s impact will vary widely across emerging Asian economies, with large emerging markets such as China and India projected to remain broadly resilient despite the external headwinds. ADB senior economist Yothin Jinjarak noted that China’s economy faces limited exposure to the crisis, thanks to multiple built-in buffers against global energy price shocks: substantial strategic petroleum reserves, a highly diversified supply base for energy imports, and a rapidly expanding renewable energy sector that reduces reliance on foreign fossil fuels.
For India, domestic consumption remains the primary engine of economic growth, supported by rising household incomes and recent tax cuts. Still, the ADB forecast that accelerating food and fuel prices will likely moderate consumption growth in the coming year.
Across the rest of South Asia, the conflict has hit regional economies on two fronts: not only through higher energy import costs, but also through severe disruption to the tourism sector, explained Rana Hasan, ADB’s regional lead economist for South Asia. “We are already seeing our two large tourism-dependent economies, the Maldives and Sri Lanka, take a hit,” Hasan said. Flight disruptions and the closure of Gulf airspace, a critical transit hub for travelers from Europe and North America heading to South Asia, have cut tourist arrivals sharply in both island nations.
In Southeast Asia, the risk of persistent, high inflation is concentrated in economies that face overlapping vulnerabilities: high energy import dependence, greater exchange rate pass-through to domestic prices, and limited policy buffers to offset shocks, according to Dulce Zara, ADB’s senior regional cooperation officer for Southeast Asia. Laos, Myanmar and the Philippines rank among the most vulnerable, she said, pointing to Laos as an example: the country has very limited fiscal space to roll out relief measures to cushion consumers from rising fuel prices. By contrast, economies such as Brunei, Indonesia and Malaysia face far lower risk, thanks to existing fuel subsidy programs, dedicated oil price stabilization funds, and diversified domestic energy supplies.
Another underrecognized drag on regional growth will come from falling remittance inflows, the ADB noted. Remittances from migrant workers employed in the Middle East are a key pillar of household consumption for many South and Southeast Asian economies, including Bangladesh, Indonesia, Nepal, the Philippines and Sri Lanka, all of which rely heavily on labor exports to Gulf nations.
Hasan added that the ultimate scale of the economic damage will hinge entirely on how the conflict unfolds: “A lot is going to depend on the duration of this Middle East conflict and how long it takes for the economies of the Middle East to recover from the conflict.”
