ADB research warns that prolonged Middle East conflict could slash growth in developing Asia and the Pacific by up to 1.3 percentage points, drive inflation higher by 3.2 percentage points, and trigger fertiliser-energy shocks that threaten regional agriculture and food security.

The ongoing conflict in the Middle East is sending fresh shockwaves through global markets, with developing economies in Asia and the Pacific facing a double blow of slower growth and rising prices, according to new research released by the Asian Development Bank (ADB). A detailed ADB brief published on 26 March 2026 outlines three risk scenarios, showing that the severity of the impact hinges on how long disruptions to energy supplies and shipping routes persist.

If the disruptions last more than a year, economic growth in developing Asia and the Pacific could be lowered by as much as 1.3 percentage points over 2026-2027, while inflation could climb by 3.2 percentage points, the report predicts. The effects would ripple through higher energy prices, broken supply chains, tighter financial conditions, and potential hits to tourism and remittances. Short-lived tensions would allow energy prices to ease quickly, but prolonged conflict would lock in higher costs and deeper economic pain.

Agriculture Faces Fertiliser and Energy Shock

The conflict is already delivering a direct blow to Asian agriculture. The Middle East supplies nearly half of global urea exports and around 30 per cent of ammonia – both critical for fertiliser production. Disruptions have tightened availability and pushed prices significantly higher. Production cuts in Qatar, where major fertiliser producer QAFCO suspended operations amid gas supply constraints, have compounded the problem. Gulf countries also account for 45 per cent of global sulphur exports and Qatar supplies roughly one-third of the world’s helium, both essential for fertiliser manufacturing.

Energy prices have surged dramatically. Crude oil climbed from around $70 per barrel in late February to nearly $120 at the peak of tensions and remains above $100. Natural gas prices have risen sharply too. Because fertiliser production is highly energy-intensive – especially nitrogen-based products like urea and ammonia that rely on natural gas – these increases are feeding directly into higher input costs for farmers across Asia.

Food Security and Farm Incomes at Risk

Higher fertiliser prices mean farmers may cut back on application, leading to lower crop yields. Rising transportation and processing costs are adding further pressure on food supply chains. The ADB warns that food inflation is likely to emerge as a major channel through which the conflict affects households. Many economies in Asia and the Pacific depend heavily on imported fertilisers, chemicals and energy, making them especially vulnerable to just-in-time supply disruptions. Shipping delays through the Strait of Hormuz have already driven up freight and insurance costs, threatening timely delivery of inputs for planting cycles.

Governments could face heavier subsidy burdens to protect food security, while farmers see squeezed margins and rising financial stress. The report highlights that prolonged conflict would amplify these risks, potentially reducing agricultural output and pushing up consumer food prices across the region.

Regional Differences in Impact

The ADB research shows uneven effects across Asia and the Pacific. Growth losses are expected to be most severe in developing Southeast Asia and the Pacific, where economies are more exposed to energy price swings and shipping disruptions. Inflation pressures, however, will hit hardest in South Asian economies, where food and energy make up a larger share of household spending and import dependence is high.

ADB Chief Economist Warns of Difficult Trade-Off

“Prolonged energy disruptions could force economies in developing Asia and the Pacific to navigate a difficult trade-off between weaker growth and higher inflation,” said ADB Chief Economist Albert Park. He urged governments to act decisively to protect the most vulnerable while building longer-term resilience.

Policy Roadmap for Resilience

The ADB brief sets out four practical policy responses. First, governments should allow energy prices to pass through to consumers rather than imposing broad subsidies or price controls. Partial pass-through encourages conservation, fuel switching and investment in alternative energy. Second, any fiscal support must be targeted and time-bound, focusing on vulnerable households and affected industries to limit fiscal costs. Third, central banks should provide targeted liquidity to calm markets without aggressive tightening that could worsen the growth slowdown; clear communication to anchor inflation expectations will be crucial. Fourth, countries should actively curb energy demand through practical steps such as temperature limits on air-conditioning, reduced non-essential lighting, peak-hour electricity-saving drives, staggered work schedules, and incentives for public transport and car-free days.

Broader Economic and Global Context

The conflict’s ripple effects extend beyond energy and fertilisers. Supply chain disruptions, tighter global financial conditions and uncertainty over Red Sea and Suez routes are all weighing on trade. Tourism and remittance flows could also suffer if the situation worsens. The ADB stresses that the scenarios carry high uncertainty and should be treated with caution, yet the underlying message is clear: Asia and the Pacific must prepare for a more challenging economic environment in the coming years.

With the region still recovering from previous shocks, the latest ADB analysis serves as a timely reminder of the region’s exposure to distant geopolitical events. Policymakers across Asia are now under pressure to balance short-term relief for farmers and households with measures that strengthen long-term supply-chain resilience and energy security.