Many Asian economies, including the Philippines, are expected to face economic shocks amid an escalating war in the Middle East, according to a report released by the Asian Development Bank (ADB).

Over the weekend, the Manila-based multilateral lender’s macroeconomic research division warned that rising geopolitical tensions could push up inflation and put pressure on currencies across the region, particularly in energy-importing economies like the Philippines that are vulnerable to oil price spikes and supply disruptions.

The ADB report titled “How will the conflict in the Middle East impact Asia’s economic outlook?” flagged the mounting risks Asia faces amid fighting among Iran, Israel, and the United States (US), which is spilling over to the broader Middle Eastern region.

“While Asia’s direct trade exposure to the Middle East is limited, the potential spillovers through energy markets, disrupted shipping, and financial conditions could be significant,” the report said.

The ADB noted that the region is particularly vulnerable to energy shocks because many economies rely heavily on imported oil and gas.

“Most economies in the region are net importers of oil and natural gas,” the report said, adding that net energy imports exceeded two percent of gross domestic product (GDP) in many Asian economies in recent years.

Energy supply routes are another major risk point. The report highlighted the critical role of the Strait of Hormuz, one of the world’s most important energy chokepoints.

“Roughly four-fifths of crude oil and liquefied natural gas (LNG) transiting the Strait ultimately flows to Asian markets, and about 20 percent of global trade in oil and LNG passes through the Strait,” the ADB noted.

Among Asian economies, the Philippines is among those likely to feel stronger macroeconomic impacts if oil prices remain elevated, reflecting its heavy dependence on imported energy.

“Smaller energy-importing economies, including the Philippines, Pakistan, and Sri Lanka, are likely to experience comparatively stronger macroeconomic effects,” the report said.

“In these economies, higher oil prices tend to transmit rapidly into inflation and exchange rate pressures through widening current account deficits and increased foreign currency demand,” the report added.

Last week, Japanese financial giant MUFG Bank Ltd. projected the peso could weaken further to ₱59-60 against the US dollar, especially if global oil prices surge to $90 per barrel. The peso closed last week at ₱59 per greenback, while oil prices jumped above $100 per barrel on Monday, March 9.

National Statistician Claire Dennis S. Mapa told Manila Bulletin last week that over 36 percent of the consumer price index (CPI) basket is directly or indirectly vulnerable to rising oil prices. Energy items such as transport fuels, electricity, liquefied petroleum gas (LPG), and kerosene—accounting for 8.23 percent of the CPI—are most directly affected, while agricultural products, meals outside the home, and road passenger transport, which together make up about 28 percent of the CPI, may face secondary impacts from higher transport and raw material costs.

The ADB also warned that disruptions to shipping and aviation routes could ripple across Asia’s supply chains and tourism industry.

“Disruptions to shipping routes or aviation corridors can transmit quickly to production costs, exports, and tourism activity,” the report said, cautioning that prolonged disruptions could weigh on prices, investor confidence, and economic growth.

The Middle East hosts millions of overseas Filipino workers (OFWs), raising concerns that prolonged instability could affect employment prospects in the region and, in turn, remittance flows to the Philippines. The Philippine government is preparing to repatriate distressed OFWs affected by the war.

Aviation disruptions would also pose risks to the Philippines’ trade flows, given that semiconductors and electronics—the country’s top merchandise exports—are largely transported by air cargo.

While some hydrocarbon-exporting economies in Asia such as Brunei Darussalam, Indonesia, Malaysia, Azerbaijan, Kazakhstan, and Turkmenistan could benefit from higher oil prices through stronger export revenues, the ADB said the broader region remains vulnerable to sustained geopolitical tensions and energy market volatility.