Economists are putting a price on the Iran war fallout in Asia. It doesn’t look good.

By Stephanie Yang, CNN

(CNN) — The fallout of the US and Israel’s war with Iran is poised to cost the Asia-Pacific economy hundreds of billions of dollars and plunge millions into poverty, a United Nations report said Tuesday.

Military escalation in the Middle East could cause output losses of between $97 billion and $299 billion in the Asia Pacific, due to rising costs for transportation, electricity and food, according to an estimate from the United Nations Development Programme.

That would equal about 0.3% to 0.8% of regional GDP, the report said. The UNDP also predicted that the war puts 32 million people at risk of falling into poverty globally, 8.8 million of them in the Asia-Pacific region.

After peace talks between the US and Iran failed to restart free trade flow in the Strait of Hormuz, President Donald Trump said he launched his own blockade on the critical waterway, threatening maritime traffic to and from Iran’s ports.

The worst oil crisis in history has already sent prices for crude and natural gas soaring and weighed on projections for economic growth. Asia is particularly susceptible to the effects of the shortage, as a heavy importer of energy from the Middle East. The prospect of a protracted conflict has pushed countries to try and conserve fuel and electricity while looking for alternative sources of energy, though options are costly and slim.

“What you’re seeing is this kind of instantaneous, massive shock where everything halts and these reserves come into play,” said Kanni Wignaraja, regional director for Asia and the Pacific at the UNDP. “If countries adjust really fast, then you’re seeing the loss to regional GDP at around $97 billion to $100 billion. You’re going to triple that if many of these countries run through these reserves and really have very little to fall back on.”

Asia is the most populous continent and accounts for more than half of the world’s manufacturing, which means economic hits to the region can have significant global impact.

It also boasts a number of key US allies such as South Korea, Japan and the Philippines, now all scrambling to save their economies as the Middle Eastern energy they rely on has now slowed to a trickle.

‘No neat and clean return’

While governments have responded to the oil shortage with initiatives to secure supply, reduce demand and provide financial assistance to offset higher costs, the UNDP said that the strain of trying to keep price rises limited, protecting households and companies and preserving public spending will only grow.

A separate report by the UN Food and Agricultural Organization warned that food shortages could reach catastrophic levels, due to the disruption to supplies of products needed for farming from the Middle East, including oil, natural gas, urea, and fertilizers. If the Strait of Hormuz remained effectively closed, the FAO said countries may need financial assistance to secure fertilizer for planting seasons and avoid a global food crisis.

“It’s essential for the ceasefire to continue, and that vessels can start to move … to avoid the problem of food inflation,” said Maximo Torero, the FAO’s Chief Economist.”

Many organizations have issued dire warnings over the severe economic impact the oil crisis will have, worsening the longer it goes on. The International Monetary Fund is expected to lower economic growth forecasts in its latest World Economic Outlook to be released Tuesday, and has said high fertilizer prices could push 45 million people into to food insecurity.

“Had it not been for this shock, we would have been upgrading global growth,” IMF managing director Kristalina Georgieva said in a speech last week in Washington. “But now, even our most hopeful scenario involves a growth downgrade. Why? Because of significant infrastructure damage, supply disruptions, losses of confidence, and other scarring effects.”

The Asian Development Bank also recently estimated that growth in the Asia Pacific would slow from 5.4% to 5.1% in both 2026 and 2027, due to the disruptions to commodities from the Middle East, and that regional inflation would rise 3.6% in 2026, up from 3% last year.

“A prolonged conflict in the Middle East is the single biggest risk to the region’s outlook, as it could lead to persistently high energy and food prices and tighter financial conditions,” said ADB Chief Economist Albert Park in a release accompanying the report.

The US and Iran have said talks to end the war will continue, and CNN has reported that US officials are discussing a potential second in-person meeting. However, analysts have said that even an immediate re-opening of the Strait of Hormuz would not restore normal standard market conditions for several months.

“Even in the best case, there will be no neat and clean return to the status quo ante,” Georgieva from the IMF said.

The-CNN-Wire
™ & © 2026 Cable News Network, Inc., a Warner Bros. Discovery Company. All rights reserved.