Asia energy crisis at worst-case scenario, ADB warns

Worst-case shock

The Asian Development Bank says Asia-Pacific is now facing the worst-case version of the energy shock linked to the Middle East conflict, turning a risk that had been building for months into a direct policy problem for the region.

ADB president Masato Kanda said the lender is seeing the fallout in higher energy, shipping and input costs. He said the pressure is already affecting economies that rely heavily on imported oil and gas.

Kanda said the bank has received formal requests totaling about $4 billion from 15 countries and is prepared to provide more lending if needed.

From warning to reality

The latest assessment builds on ADB’s March response, when it launched emergency support for countries affected by the fallout from the Iran war and restored financing for corporate oil purchases.

That earlier move reflected concern that the conflict could tighten fuel markets across Asia-Pacific. The June warning suggests the bank now sees that concern as an active financing challenge, not a hypothetical one.

Kanda said the region is the most exposed because many economies depend on oil and gas imported from the Middle East. That dependence leaves them vulnerable not only to higher fuel prices, but also to broader trade and transport spillovers.

Countries seeking help

The Philippines has made the largest request so far, at $1.75 billion. India has asked for $1.5 billion to build and accelerate resilience.

Bangladesh has sought more than $3 billion in financing, while Sri Lanka is also among the countries seeking support. The FT reported that Sri Lanka has already received additional ADB budget support.

Taken together, the requests show how widely the shock is being felt. Governments are looking for help not just with energy imports, but with the secondary costs that follow when fuel, shipping and industrial inputs all become more expensive.

Growth and inflation pressure

ADB cut its 2026 Asia-Pacific growth forecast to 4.7% from 5.1%, while raising its inflation projection to 5.2% from 3%.

Those revisions point to the same macroeconomic strain from two directions. Slower growth signals weaker regional momentum, while higher inflation suggests households and businesses are already absorbing more of the shock.

For import-dependent economies, the effect can spread beyond the fuel bill. Higher energy and transport costs can ripple into fertilizer, food and manufactured goods, adding pressure on current accounts, subsidies and fiscal buffers at the same time.

What happens next

ADB said it still has ample headroom for further lending, but the eventual size of the response will depend on how many more countries ask for help and how much of the current pipeline is approved and disbursed.

The next watch points are straightforward: whether additional borrowers come forward, whether ADB issues a standalone update on its revised outlook, and whether governments respond with subsidies, import controls or other emergency measures.

For now, the bank’s message is that the region has moved from preparing for disruption to dealing with it. Asia-Pacific is already absorbing the costs of a Middle East energy shock that had previously been treated as a worst-case scenario.