The Asia-Pacific Economic Cooperation (APEC) warned that economic growth across the region is expected to slow over the next two years as soaring oil prices, supply chain disruptions, and rising food costs linked to the worsening conflict in the Middle East weigh on trade and consumer demand.

In its latest regional trends analysis report released last Thursday, May 21, APEC's policy support unit (PSU) said growth in the Asia-Pacific region is projected to ease to 3.1 percent in 2026 from 3.3 percent in 2025, before moderating further to three percent in 2027.

The weaker outlook comes after oil prices surged by 52.8 percent since February, climbing from $68 per barrel to $103.9 per barrel in March amid broader disruptions in the Middle East that have affected shipping, logistics, and food supply chains.

“The region enters 2026 with short-term resilience intact, but knock-on energy price shocks, weakening demand, intensifying supply chain disruptions and narrowing space to respond to economic shocks are casting a longer shadow over the medium-term outlook,” PSU director Carlos Kuriyama said in a statement.

“It is ordinary households and businesses that are feeling the consequences most,” Kuriyama added.

According to the report, more than half of APEC member economies are expected to experience slower output growth as higher fuel costs ripple across industries and trade flows.

PSU noted that oil and gas account for 49 percent of APEC’s energy mix, while the region imports over 45 percent of its crude oil and 23 percent of its gas from the Middle East, exposing economies to geopolitical and supply risks.

APEC also warned that food security pressures are intensifying because the region imports 27 percent of its nitrogen-based fertilizers from the Middle East.

“Alongside rising fuel prices and shipping disruptions, food prices are also climbing sharply across the region, with prices of vegetable oils, cereal and meat facing the steepest increases as of April 2026,” PSU analyst Rhea C. Hernando said.

Trade conditions are also deteriorating as economies impose more tariffs and trade-restrictive measures, with growth in merchandise export volumes projected to slow to between 3.3 percent and 3.7 percent from 2026 to 2028, significantly weaker than the 7.6-percent expansion recorded in 2025.

“We are seeing supply chain pressures intensify across the region as freight costs on intra-APEC routes continue to rise, driven by higher fuel prices and slowing port traffic,” PSU researcher Eldo Simanjuntak said.

The report also projected regional inflation to accelerate to 2.9 percent in 2026 from 2.4 percent in 2025, although this remains below the projected global average of 4.4 percent.

APEC said the mounting economic pressures underscore the need for stronger regional cooperation on energy security, trade resilience, and fiscal stability, while also encouraging member economies to diversify energy sources, strengthen supply chains, and support affected households and businesses.