A conflict in the Middle East could slow economic growth in developing Asian countries by 0.3–1.3 percentage points (pp) in 2026–2027, and also push up inflation by 0.6–3.2 pp, if disruptions in the energy market last for more than a year.
In the ADB’s baseline scenario, it is assumed that the conflict will last up to two months. In this case, global oil and gas prices will peak in March 2026, then gradually fall back to pre-conflict levels. In this scenario, the average price of Brent crude will be $72 per barrel in 2026 and $63 in 2027.
Under the first scenario, if supply disruptions continue until the end of June, the average oil price could rise to $105 per barrel in the third quarter. GDP growth in developing Asian countries will slow by 0.3 percentage points, whilst inflation will accelerate by 0.6 percentage points.
Under the second scenario, if the Strait of Hormuz remains closed until the end of September, oil will cost an average of $130 per barrel in the second quarter and $120 per barrel in the third quarter. In this case, the region’s economic growth rate will slow by 0.7 percentage points, whilst inflation will rise by 1.2 percentage points.
The third scenario assumes that supply issues will persist until the end of February 2027, which will drive oil prices up to $155 in the second quarter of this year. The average oil price is then expected to hover around $140 per barrel between the third quarter of this year and the first quarter of 2027. Under this scenario, the negative impact on the region’s GDP would be 1.3 percentage points, whilst inflation would accelerate by 3.2 percentage points.
