Iran-Israel Conflict Disrupts Trade, Sparks Regional Security Concerns

The Iran-Israel conflict is raising significant concerns across Asia, impacting trade, security, and economic outlooks. India is closely monitoring the situation, especially the threats to critical shipping routes like the Strait of Hormuz and the Red Sea, which handle a substantial portion of its crude oil and LNG imports, with potential disruptions expected to raise oil prices and inflation while pressuring the rupee and fiscal management. Pakistan has responded by sealing key border crossings with Iran and repatriating citizens amid fears of regional instability and the spillover of unrest into its volatile Balochistan province, despite ongoing diplomatic engagement between Islamabad and Tehran. Economically, India's Chief Economic Adviser cautions that while the conflict may not cause a sharp growth drop akin to the 2008 financial crisis, it could cause a prolonged slowdown due to rising crude oil prices and global uncertainties. Similarly, Indonesia’s Finance Minister highlights the risks from surging oil prices and global economic slowdown, noting potential pressures on inflation, interest rates, capital flows, and the domestic budget. Together, these developments underscore growing geopolitical and economic vulnerabilities in Asia due to the escalating Iran-Israel conflict.