The Asian Development Bank, or ADB, expects growth in developing Asia-Pacific economies to slow to 5.1 percent this year as the escalating crisis in the Middle East weighs on the region.

The bank's flagship Asian Development Outlook, or ADO, published on Friday, also forecast inflation to rise to 3.6 percent in 2026 owing to higher oil prices.

The conflict in the Middle East has disrupted energy supplies, pushing oil prices to over $100 per barrel in recent weeks. The global benchmark Brent crude was trading at over $96 per barrel on Friday.

Iran's state-run Press TV reported on Wednesday that the Strait of Hormuz, a strategic waterway used for transporting oil and gas from the Gulf to most Asia-Pacific countries, had been fully closed.

During an ADO launch webinar, John Beirne, principal economist at ADB, said that, with most Asian economies being net importers of oil and gas from Gulf countries, higher energy prices can lead to "significant income losses".

However, Beirne said that the impact of the conflict extends beyond the energy and shipping sectors, noting that other key agricultural and industrial supply chain inputs have also been affected.

He said that Middle Eastern economies are major suppliers of petrochemicals, fertilizers, industrial gases, and metals, most of which are transported through the Strait of Hormuz.

"High fertilizer and diesel prices raise agricultural costs, which could lead to less input use and lower yields next year, and this could contribute to food insecurity," Beirne said.

ADB economists said the extent of the conflict's impact varies across emerging Asian economies, with large economies like China and India seen as remaining robust despite external headwinds.

China's economy is "relatively resilient" to the conflict in the Middle East, according to ADB senior economist Yothin Jinjarak.

Yothin said that China has several buffers against higher oil prices. These include significant energy reserves, a diversified energy supply, and a rapidly growing renewable energy sector.

Take a hit

In India, domestic consumption will remain the key driver of growth, thanks to growing incomes and tax cuts. However, the ADB forecast that rising food and petroleum prices may temper consumption.

Elsewhere in South Asia, economies are not only suffering from their dependence on imported oil and gas, but the conflict has also pressured the region's tourism industry, according to Rana Hasan, ADB's regional lead economist for South Asia.

"We are already seeing our two large tourism-dependent economies, the Maldives and Sri Lanka, take a hit," Hasan said.

Flight disruptions and the closure of Gulf airspace have reduced tourist arrivals in these two countries. The Middle East serves as a major transit hub for visitors from Europe and North America traveling to South Asia.

In Southeast Asia, "inflation vulnerability" is highest in countries where import dependence, exchange rate pass-through, and limited buffers intersect, according to Dulce Zara, ADB's senior regional cooperation officer for Southeast Asia.

Zara said Laos, Myanmar, and the Philippines are among the most vulnerable.

Laos, for instance, has limited fiscal space to cushion the rising oil prices, she noted.

However, the risk is lower for countries like Brunei, Indonesia, and Malaysia, which extend fuel subsidies, have oil price stabilization funds, and diversify their energy supply.

ADB economists said a reduction in remittance inflows will also hurt Bangladesh, Indonesia, Nepal, the Philippines, and Sri Lanka.

These countries are major labor exporters to the Middle East, with remittances from migrant workers bolstering household consumption in Southeast and South Asian economies.

"A lot is going to depend on the duration of this Middle East conflict and how long it takes for the economies of the Middle East (to recover from the conflict)," Hasan said.

prime@chinadailyapac.com