Report states that escalating Middle East tensions impact energy, ASEAN economies come under pressure

Ask AI · How can the Middle East situation trigger an ASEAN stagflation risk through energy channels?

A report released by Malayan Investment Bank recently shows that the current heightened tensions in the Middle East are spilling over into Asia via the energy and supply-chain channels, which may create a “stagnation-and-inflation shock” for ASEAN economies—dragging down growth and pushing up inflation.

The report points out that the Strait of Hormuz, as a critical global energy and bulk-commodity transportation corridor, will pose a shock to global crude oil supply if it is disrupted, and will transmit pressure to regional economies through higher oil prices and supply uncertainty. At the same time, the Persian Gulf is also an important source of key industrial inputs such as urea, sulfur, methanol, and ethylene; supply disruptions could ripple through multiple industry supply chains, including petrochemicals, agriculture, transportation, and construction.

Against this backdrop, rising energy prices and supply disruptions will increase inflation levels, weaken the current-account positions of most countries in Southeast Asia, and raise fiscal pressure. If supply-chain disruptions persist, output across multiple industries may be restrained. At the same time, higher shipping and aviation costs, along with factors such as the closure of Middle East airspace and ports, could also create a demand shock for tourism and trade, further weighing on the region’s economic recovery.