A prolonged conflict in the Middle East could reduce economic growth in developing Asia and the Pacific by up to 1.3 percentage points over 2026-2027 if energy market disruptions persist for more than a year, according to new research from the Asian Development Bank (ADB), APA-Economics reports.
The Manila-based lender warned in a Tuesday brief that a worst-case scenario involving severe tensions would also drive inflation up by 3.2 percentage points across the region. The impact is primarily led by higher energy prices, supply chain disruptions and tighter financial conditions for a region that remains the world’s largest energy-importing hub.
The regional macroeconomic outlook for 2026 is now centered on geopolitical tensions as a primary driver. While direct trade exposure to Iran and other Middle Eastern nations is limited, the ADB noted that Asian economies are highly vulnerable to spillovers in global oil and liquefied natural gas (LNG) markets.
Under the ADB baseline scenario, where the conflict lasts only 1 to 2 months, Brent crude is projected to average $72 per barrel in 2026. However, under “Scenario 3,” which assumes severe tensions lasting 1 year, oil prices could spike to over $155 in the second quarter of 2026 before slowly declining.
Developing Southeast Asia and the Pacific are expected to suffer the most significant hits to growth. Under long-lasting tensions, cumulative growth losses for those subregions are estimated at 2.3 percentage points and 2.2 percentage points, respectively.
Some hydrocarbon exporters in Central Asia may see a slight growth increase of 0.2 percentage points as they benefit from higher prices.
“Asia’s exposure to the conflict is further underscored by import source concentration,” the report said, noting that about 20 percent of global oil and LNG trade passes through the Strait of Hormuz.
The report noted that the region’s collective response is fragmented because major consumers like the People’s Republic of China and India are not part of the International Energy Agency framework. This limits the effectiveness of coordinated emergency oil reserve releases.
Beyond fuel, the conflict threatens maritime transport and aviation corridors linking Asia with Europe. Manufacturing sectors relying on just-in-time delivery for semiconductor components, fertilizers, and chemicals are particularly at risk of production delays and rising costs.
Asian Development Bank chief economist Albert Park said the duration of the disruptions will ultimately determine the severity of the economic fallout for the region’s developing nations.
