ADB warns prolonged Middle East conflict could hit Asia’s growth, raise inflation

PHNOM PENH, CAMBODIA, March 30, 2026 (KPT) – A prolonged conflict in the Middle East could lower economic growth in developing Asia and the Pacific by up to 1.3 percentage points over 2026–2027 and raise inflation by 3.2 percentage points, the Asian Development Bank (ADB) said Last Thursday.

The Manila-based lender said disruptions to energy markets would ripple across the region through higher fuel costs, supply chain and trade shocks, and tighter financial conditions. Tourism and remittances could also be affected.

An ADB brief outlined three risk scenarios, stressing that the impact will depend largely on the duration of disruptions. Short-lived conflict would see energy price pressures ease relatively quickly, while prolonged instability would trigger more persistent effects on growth and inflation.

The report said Southeast Asia and Pacific economies would face the sharpest slowdown, while South Asia would see the highest inflation.

“Prolonged energy disruptions could force economies in developing Asia and the Pacific to navigate a difficult trade-off between weaker growth and higher inflation,” ADB chief economist Albert Park said. “Governments should focus on containing market stress and protecting the most vulnerable, while adopting policies to improve longer-term resilience.”

Cambodia’s Energy Minister Keo Rottanak, who inspected new LPG and petroleum shipments in Phnom Penh last weekend, said the government was working to maintain stability.

 “While supply is tight across the region, we are coordinating with domestic and international suppliers to sustain fuel and gas supply,” he said, adding that tax cuts were introduced to ease the burden on households and businesses.

The ADB urged targeted fiscal support, prudent central bank action, and practical measures to curb energy demand, noting that broad subsidies or price controls risk distorting incentives and delaying adjustment.