Asia’s economies could face a tougher impact from the ongoing Middle East conflict, especially if it disrupts energy supplies. According to the International Monetary Fund (IMF), the region is more exposed than others due to its heavy dependence on fuel imports from the Middle East, reported Reuters.
An IMF official has cautioned that a prolonged conflict could slow growth, push up inflation and strain external balances across Asian economies.
Asia relies heavily on imported oil and gas, particularly from the Middle East. This makes it more vulnerable when supply disruptions or price spikes occur.
Krishna Srinivasan, Director of the IMF’s Asia-Pacific department, said, “This is a shock, which is going to affect Asia more than other regions.”
Data from the IMF shows that oil and gas usage accounts for about 4% of Asia’s GDP—almost double that of Europe. At the same time, net imports of oil and gas stand at roughly 2.5% of GDP, reflecting the region’s limited domestic production.
Despite the risks, Asia entered 2026 on relatively strong footing. Lower-than-expected tariffs from the United States, a strong technology cycle and easy financial conditions have supported growth so far.
These positive factors are helping balance the impact of rising energy risks, keeping the IMF’s growth outlook broadly unchanged from earlier projections.
Under its base scenario, the IMF expects Asia’s growth to ease slightly—from 5% in 2025 to 4.4% in 2026 and 4.2% in 2027.
However, the situation could worsen if the conflict continues for a longer period.
Srinivasan warned that under more severe scenarios, growth could drop by 1 to 2 percentage points cumulatively by 2027. “What we’re going to see is higher inflation, weaker growth and weaker current account balances,” he said.
The IMF says the impact is not limited to rising oil prices. “This is a shock which has a price impact and a quantity impact,” Srinivasan explained.
If the conflict leads to supply shortages, it could affect not just fuel availability but also oil-based chemicals and gas used in manufacturing and food production. He added,“If you have a price shock and shortages, that could lead to greater non-linearities especially if the shock is not transient.”
The IMF expects inflation in Asia to increase from 1.4% in 2025 to 2.6% in 2026, before easing slightly to 2.4% by 2027. This rise will largely be driven by higher energy costs filtering through the economy.
The agency has advised central banks in the region to stay cautious. While they may initially look through the shock, policymakers need to remain alert if inflation pressures begin to rise more sharply.
Srinivasan said central banks should be “very careful and agile, so that if you see inflation expectations getting unanchored, you can start tightening.”
At the same time, governments have limited room for large spending programmes after pandemic-era support measures. Any fiscal help, the IMF says, should be targeted and focused on those who need it most.