New research by the Asian Development Bank said developing economies in the region could see growth reduced by up to 1.3 percentage points over 2026-2027, while inflation could rise by as much as 3.2 percentage points if energy disruptions persist for more than a year.
The conflict is affecting economies through higher energy prices, supply chain and trade disruptions, and tighter financial conditions. Tourism and remittances may also be impacted.
An ADB policy brief outlines three scenarios, with outcomes largely dependent on how long disruptions last.
Short-term disruption scenario (to end June 2026): Oil prices rise to about USD 105 per barrel before easing by the third quarter of 2026, while gas prices increase in the second quarter. Growth is projected to fall by 0.3 percentage points, with inflation rising by 0.6 percentage points.
Prolonged disruption scenario (to end September 2026): Oil prices climb to USD 130 in the second quarter and USD 120 in the third quarter before stabilising. Gas prices increase more sharply. Growth declines by 0.7 percentage points, while inflation rises by 1.2 percentage points.
Severe disruption scenario (to February 2027): Oil prices surge above USD 155 in the second quarter of 2026, remaining elevated through early 2027. Gas prices approach levels seen after the Russian-Ukraine war. Growth could fall by 1.3 percentage points, with inflation jumping by 3.2 percentage points.
The report warns that the most severe growth impacts would be felt in Southeast Asia and the Pacific, while inflationary pressures would be strongest in South Asia.
Albert Park said prolonged energy disruptions could force governments into a difficult trade-off between weaker growth and higher inflation, urging policymakers to contain market stress while protecting vulnerable groups.
The ADB recommends four key policy responses. Governments should allow price signals to function to encourage energy efficiency and investment in alternatives, rather than relying on broad subsidies that may distort markets.
Fiscal support should be targeted and temporary, prioritising vulnerable households and the most affected industries to limit long-term budget pressures.
Central banks are advised to manage volatility and anchor inflation expectations through clear communication, while avoiding overly aggressive tightening that could worsen economic slowdowns.
Authorities are also encouraged to curb energy demand through practical measures such as limiting air-conditioning, reducing non-essential lighting, promoting public transport and encouraging flexible working arrangements.
The report underscores the high level of uncertainty surrounding the conflict and its economic fallout, warning that outcomes will depend heavily on how disruptions evolve in the months ahead.
