BBC World Service – World Business Report
Asian Economies Feel the Pain of the US-Israel War with Iran
Why It Matters
Understanding this ripple effect is crucial for investors, policymakers, and consumers who rely on affordable energy and food imports from Asia. The episode highlights how a distant geopolitical clash can quickly translate into higher living costs, tighter monetary policy, and altered trade dynamics, making it a timely alert for anyone tracking global supply chains and inflation trends.
Key Takeaways
- •Southeast Asia faces steep inflation from war‑driven oil price surge.
- •ADB provides emergency funds and trade finance for oil imports.
- •Jet fuel doubled, airlines cutting routes and raising fares.
- •Prolonged conflict could shave up to 1.3% regional growth.
- •Iran’s yuan payments challenge the dollar‑dominant global currency system.
Pulse Analysis
The US‑Israel conflict with Iran has sent oil prices soaring, and Southeast Asian economies are feeling the brunt. With more than 90% of the world’s oil and gas flowing through the Strait of Hormuz, the closure of that chokepoint has pushed regional inflation up by roughly 0.8% and threatens to cut growth by as much as 1.3% if the war drags on a year. The Asian Development Bank has stepped in with short‑term budgetary support and trade‑finance facilities to keep oil imports flowing, but those measures are limited by fiscal constraints and rising debt burdens across the region.
Energy markets are reacting sharply. Brent crude, still up about 45% since the war began, has driven jet fuel prices to double, prompting airlines such as AirAsia, Vietnam Airlines and Jetstar to slash routes, raise fares, and even park aircraft. The higher cost of air travel ripples through tourism and supply chains, squeezing both business and leisure travelers. Companies are forced to balance price caps and targeted assistance against the reality that prolonged high fuel costs erode competitiveness and consumer demand.
Beyond immediate price shocks, Iran’s willingness to accept payment in Chinese yuan signals a potential shift in the global currency order that has been dollar‑centric since 1945. If more oil transactions move to alternative currencies, it could weaken the dollar’s reserve status and reshape financing for emerging markets. Policymakers and investors must therefore monitor not only the short‑term inflationary pressure but also the longer‑term strategic implications for trade, finance, and geopolitical alignment in the Asia‑Pacific region.
Episode Description
The Asian Development Bank's Chief Economist Albert Park tells us that the conflict in the Middle East could prove 'traumatic', knocking as much as 1.3% of Asian GDP growth, depending on how long it goes on for. He believes that the countries most vulnerable include Sri Lanka, Maldives, Laos, Bangladesh and Pakistan. Meanwhile the price of jet fuel has more than doubled since the start of the war with Iran, with numerous major airlines raising their prices. Jetstar New Zealand cancelled some domestic services and flights between Australia and New Zealand. Vietnam Airlines also scrapped almost a two dozen domestic flights a week. And why shares in the Chinese toy-maker Pop Mart – who make Labubu Dolls – have tumbled more than twenty percent…their biggest drop in nearly a year.
Presenter: Sarah Rogers
Senior Producer: Craig Henderson
Comments
Want to join the conversation?
Loading comments...