The ongoing conflict in the Middle East has led to a significant rise in Brent crude oil prices, reaching as high as $118 per barrel. This surge is causing economic ripples across Asia, where approximately 90% of crude oil and 83% of liquefied natural gas (LNG) transiting through the Strait of Hormuz are destined. The conflict, which began with US and Israeli strikes on Iran on 28 February 2026, has resulted in widespread damage to production facilities, keeping energy prices elevated.
UOB Global Economics and Markets Research highlights that the sustained oil shock could increase ASEAN inflation by approximately 1 percentage point for every $10 increase in oil prices over a 6–12 month period, whilst trimming growth by about 0.7 percentage points. With oil prices at $100 per barrel, inflation could rise by 2 percentage points to around 4% in 2026, and growth could slow by 1.4 percentage points to approximately 3.2%.
Governments across Asia are implementing measures to mitigate the impact, including subsidies and temporary tax cuts on energy products. The Philippines has declared a national energy emergency, and Vietnam’s national carrier is reducing flight schedules. Despite these challenges, central banks are cautious about making drastic policy changes, as monetary tools are less effective against supply-side shocks.
The situation remains fluid, with potential for further escalation. UOB’s research suggests that if oil prices persist at $150 per barrel, inflation in ASEAN could rise by up to 7 percentage points, significantly impacting economic stability.
