Economic Shockwaves from the Iran War: Impacts on Asia-Pacific

The ongoing military conflict involving the United States, Israel, and Iran, which escalated on February 28, 2026, has triggered significant economic disruptions across the Asia-Pacific region. The war has led to soaring energy prices and severe supply chain interruptions, prompting forecasts of economic downturns in various countries reliant on energy imports from the Gulf. The International Monetary Fund (IMF) has revised its growth projections for emerging and developing Asia from 5.5% to 4.9% for 2026, reflecting the adverse effects of the conflict.

The Iran War’s Economic Shockwaves: An Asia-Pacific CrisisSouth China Morning PostSoutheast Asia and the Iran War

Countries such as the Philippines and Thailand, which depend heavily on Gulf imports for energy—up to 98% in some cases—are facing acute crises. The closure of the Strait of Hormuz, a critical passage for approximately 20% of the world’s oil and liquefied natural gas, has exacerbated the situation. Brent crude oil prices have surged to around $82 per barrel, leading to a declared national energy emergency in the Philippines, where strategic reserves are dwindling.

The Iran War’s Economic Shockwaves: An Asia-Pacific Crisis

The Asian Development Bank has also forecasted a slowdown in growth for the region, predicting a decline from 5.4% in 2025 to 5.1% in 2026. This economic strain is compounded by logistical paralysis, which threatens agricultural production and food security, particularly in Thailand and Cambodia, where diesel shortages are impacting irrigation and machinery.

South China Morning Post

Southeast Asia's economic landscape is further complicated by the region's historical ties to China, which has become a dominant trading partner. The war has prompted some Southeast Asian nations to seek oil from traditional adversaries of the U.S., such as Iran and Russia, marking a significant shift in energy procurement strategies. For instance, the Philippines recently received its first shipment of Russian crude oil in five years, highlighting a potential pivot away from U.S. influence.

Southeast Asia and the Iran War

As countries grapple with rising energy costs and supply chain disruptions, many are implementing measures to mitigate the crisis. The Philippine government has rolled out fuel subsidies and accelerated renewable energy projects to reduce reliance on imported fuels. However, the long-term economic outlook remains uncertain, with analysts warning of potential stagflationary pressures that could lead to widespread poverty.

The Iran War’s Economic Shockwaves: An Asia-Pacific Crisis

Critics argue that the U.S. foreign policy under President Donald Trump has exacerbated the situation, pushing many Asian countries to seek alternatives to American energy sources. This shift is perceived as a failure of U.S. leadership in the region, with some analysts suggesting that the war has reinforced the notion of the U.S. as an unreliable partner. The ongoing conflict has led to a reassessment of alliances, with countries like Indonesia and South Korea actively engaging with Iran and Russia for oil supplies.

New York Times

As the conflict continues, the Asia-Pacific region faces a critical juncture. The potential for prolonged disruptions raises questions about the resilience of global supply chains and the region's dependency on Middle Eastern energy corridors. In response, there may be a significant pivot towards domestic renewable energy sources and alternative trade partnerships, reshaping the economic narrative of the region for years to come.

The Iran War’s Economic Shockwaves: An Asia-Pacific Crisis

• “The impacts are so rapid and deep,” — Phillip Cornell, Senior Fellow, Atlantic Council’s Global Energy Center

New York Times

• “U.S. foreign policy under Trump is to push many away from the U.S. to seek other alternatives,” — Huong Le Thu, Deputy Director, International Crisis Group

New York Times