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Why war on Iran threatens to unleash unrest in South Asia
Analysts warn the crisis is threatening to spill over into wider economic and political instability
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While the Iran war has sent shock waves through energy markets across Asia, one corner of the region has been hit especially hard.
South Asia’s reliance on Middle Eastern fuel and Gulf remittances threatens to push some of its most exposed economies to the brink, analysts warn, as the conflict drives energy and food costs to multi-year highs.
For Sri Lanka, Bangladesh and Pakistan, whose International Monetary Fund bailout programmes and thin fiscal buffers limit their ability to shield citizens from war-driven price shocks, the crisis threatens to spill over into wider economic and political instability.
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It could do the same in Nepal, where massive student-led protests toppled a government last year. Bangladesh and Sri Lanka experienced their own youth-led popular uprisings in 2024 and 2022, respectively.
“The longer this war goes on, the more closely the impact will be felt,” said Pearl Pandya, South Asia senior analyst at the Armed Conflict Location and Event Data project, an independent global conflict monitor.
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“The region relies heavily on the Gulf and Iran for oil, gas and fertilisers, while remittances from large diaspora populations – particularly in countries like Nepal and Bangladesh – remain a critical economic lifeline.”
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