Asia Faces Economic Risks from Sustained Oil Price Increases Amid Middle East Tensions

Asia is identified as the most vulnerable region to sustained oil price increases due to its heavy dependence on imported energy and trade openness. Rising oil prices pose a negative terms-of-trade shock, potentially increasing inflation risks and fiscal pressures, especially in large energy importers like Korea and Taiwan. While local fuel price regulations may mitigate immediate consumer impacts, prolonged geopolitical tensions in West Asia could weaken growth and heighten macroeconomic instability. Central banks may avoid aggressive tightening, viewing inflation as supply-driven.