Escalating conflict in the Middle East is sending shockwaves through Asia-Pacific economies, causing significant disruptions to fuel and supply chains. The immediate effects are evident in sharp increases in transport costs, energy and fertilizer prices, alongside currency pressures and financial market volatility.
“The most immediate economic impact…are considerable increases in freight costs and oil, gas and fertilizer prices,” stated Hamza Ali Malik, Director of Macroeconomic Policy Division at the UN’s Asia-Pacific development arm (ESCAP). He further cautioned that higher inflation, weaker exports, and rising debt risks are likely consequences.
Strait of Hormuz Critical Chokepoint Under Threat
The epicenter of the disruption is the Strait of Hormuz, a vital maritime chokepoint. This narrow passage handles approximately a quarter of global seaborne oil trade, as well as substantial volumes of liquefied natural gas and fertilizers. Heightened hostilities have led to a near halt in ship transits, prompting immediate reactions in global energy markets. Volatile Brent Crude oil prices have surged past $100 per barrel, while increased transport and insurance costs exacerbate the strain. These impacts are rippling through supply chains, raising concerns for trade, development, and the delivery of essential goods and humanitarian aid.
Supply Chains Under Intense Pressure
The repercussions are being felt across all sea routes. Major shipping companies have suspended services to the Middle East, leaving containers stranded in congested ports. At least 20,000 seafarers in the region are directly affected.
“There are significant early signs of disruption to shipping routes,” noted Rupa Chanda, Director of Trade Division at ESCAP. She highlighted that the effects are already impacting key industries. Shortages of helium and specialized gases from the Gulf are creating an “near-immediate crisis” for semiconductor and advanced electronics production, while disruptions to petrochemical feedstocks are threatening manufacturing across major Asian economies. Furthermore, fertilizer shortages are raising concerns about future crop yields in South Asia, a region with nearly two billion people, and beyond.
Rising Prices Exacerbate Household Costs
Spikes in energy prices are directly contributing to inflation and increasing the cost of living. UN estimates indicate a roughly 45 percent rise in oil prices and a 55 percent increase in gas prices since late February, with fertilizer prices up by 35 percent. Regional inflation could climb to 4.6 percent in 2026, up from 3.5 percent in 2025. In several countries, higher fuel prices are already driving up transport, production, and food costs, disproportionately affecting poorer households.
Country-Level Impacts Intensify
In Sri Lanka, where petroleum constitutes about a quarter of total imports, authorities have implemented fuel rationing and reduced public events to conserve supplies. Schools have adopted a four-day week, and public sector operations have been scaled down. Pakistan has experienced overnight surges in fuel and grocery prices, with long queues reported at petrol stations. Authorities have introduced fuel conservation measures, including a four-day work week, school closures, and work-from-home policies. Crisis-stricken Myanmar is also facing acute pressures, with fuel shortages leading to strict rationing that disrupts transport, businesses, and humanitarian operations.
“These disruptions are adding new strain to an economy in Myanmar that was already under pressure,” said Gwyn Lewis, UN Resident and Humanitarian Coordinator ad interim. “Prices are rising, essential goods are harder to find, and families’ purchasing power continues to fall.”
From Economic Shock to Household Crisis
In Nepal, the crisis is manifesting not only economically but also in daily life. At least one migrant worker has been killed in the Gulf, dozens injured, and tens of thousands stranded, unable to return home or travel to their places of work. Over 1.7 million Nepali migrants work in the Gulf, representing more than 65 percent of the country’s overseas labor migration. Remittances from the Gulf constitute over a quarter of Nepal’s GDP and support nearly six in ten households.
“This is not a distant crisis for Nepal. It’s very near and very personal,” remarked Numan Özcan of the International Labour Organization (ILO). The scale of the impact varies, but a prolonged crisis could lead to severe consequences. ESCAP warns that growth across developing Asia-Pacific economies could slow to around 4.0 percent in 2026, down from 4.6 percent in 2025. Poverty, food insecurity, and inequality may worsen, alongside job losses and potential displacement of migrant workers.
To mitigate these impacts, ESCAP recommends coordinated policy actions, including targeted fiscal support, cash transfers, and assistance for small businesses. Countries might also need to tighten monetary policy to manage inflation and financial stability risks. Longer-term efforts should focus on diversifying energy sources, trade routes, and supply chains.
The Human Cost
Beyond the economic fallout, the deeper concern lies in the human toll, as global shocks increasingly affect homes and villages. “As the crisis continues, the main risk is that an external economic shock becomes a household crisis,” stated ILO’s Numan Özcan.
