West Asia conflict puts Asian economies on edge

THE ongoing conflict in West Asia has triggered a wave of concern across the globe, particularly among Asian countries. In an increasingly interconnected global economy, geopolitical tensions in one region can quickly translate into economic stress across the developing world. A prolonged crisis in West Asia could create a complex web of economic challenges for emerging market economies. Rising oil prices, inflationary pressures, volatile capital flows, trade disruptions and potential declines in remittances collectively threaten macroeconomic stability.
Petroleum represents the most immediate area of vulnerability. For oil-importing countries in Asia, the conflict is not a distant war; it is a direct threat to their economic security. Major energy importers such as Japan, South Korea, China and India are particularly exposed. These economies face risks of weakened growth, widening trade deficits and potential disruption of vital shipping routes through the Strait of Hormuz.
The Asian region imports roughly 60 per cent of its oil from the Middle East, making global energy supply chains increasingly vulnerable as the conflict escalates. No doubt, the recent strikes on Kharg Island, Iran’s major oil export hub, could further aggravate the global energy crisis.
In 2025, India imported crude oil and petroleum products worth roughly $70 billion from West Asian countries. For large oil-importing emerging economies such as India, higher oil prices directly translate into a larger import bill and widening Current Account Deficits (CAD).
Another major consequence is inflation. Rising fuel costs affect transportation, manufacturing and electricity generation, thereby increasing overall inflationary pressures. Governments often face the difficult choice of passing higher prices on to consumers or absorbing the shock through subsidies, which can strain public finances. If inflation rises beyond the comfort level of Central Banks, they may be forced to increase interest rates to contain price pressures — an action that could adversely affect economic growth.
Asian currencies have also come under pressure due to capital outflows and increased demand for the greenback. The Indian rupee has experienced significant volatility and recently it crossed 92.48 against the US dollar for the first time.
Another major concern is the disruption of global supply chains. Shipping routes in the region face increased security risks and disruptions while insurance premiums for cargo have risen sharply, increasing the cost of international trade.
Exporters across Asia are also vulnerable. Sectors such as agriculture, marine products and other perishable goods are particularly affected by delays in transportation. Prolonged supply chain disruptions could lead to shortages of essential commodities in some regions and contribute to rising global food prices.
The tourism sector in many Asian economies is closely linked with developments in West Asia. Disruptions in flight services, combined with rising airfares, have significantly affected tourism flows.
The slowdown and disruption therefore affects not only airlines and hotels but also travel agencies, transport operators, restaurants and small businesses that depend heavily on tourism-related activities. As a result, many workers employed in the sector face job losses or reduced incomes. In addition, this affects the vital forex earnings of these countries.
Millions of Asian expatriates work in West Asian countries. Workers from India, Pakistan, Bangladesh and the Philippines constitute a large diaspora in the region.
If the crisis leads to economic slowdown or instability in Gulf economies, remittances to their home countries could decline significantly. Job losses in sectors such as oil and gas, construction, retail, hospitality and logistics would directly affect expatriate communities.
Such disruptions would also have broader implications for the economies of their home countries, where remittances serve as an important source of income and foreign exchange. In addition, the families of expatriates often experience considerable emotional stress and uncertainty during periods of regional instability.
Sustained peace and stability in West Asia are therefore critical not only for the region but also for the broader economic stability of Asia. In this context, dialogue and diplomatic engagement among the conflicting parties are essential to finding an amicable and lasting solution in the interest of humanity across the globe.