New UNDP assessment links Asia-Pacific’s reliance on imported energy and critical supply chains to rising pressure on households, small businesses, and public budgets, with 8.8 million people at risk of falling into poverty
Years of human development gains across Asia and the Pacific are under pressure as the impacts of the recent military escalation in the Middle East ripple through economies and households, despite a temporary ceasefire.
As the situation remains fluid, a current preliminary analysis by UNDP examines how heightened volatility, transmitted through energy, trade, and labour markets, is straining incomes, consumption, jobs and social protection across the region. Low-income households, informal workers, migrants, and small enterprises are among the most at risk. Women are the most vulnerable across these categories.
The report synthesizes impact and needs assessments covering 36 countries, complemented by macroeconomic simulations, and provides a regionwide outlook as well as how different countries are currently responding to these pressures.
Rising fuel and freight costs are the most immediate pressure point. With over 80 percent of crude and LNG transiting the Strait of Hormuz destined for Asian markets, the region is experiencing rapid pass through of higher pricing on transport, electricity, food and fertilizer.
The report estimates that 8.8 million people are at risk of falling into poverty. Output losses could range from US$97 billion to US$299 billion, equivalent to between 0.3 and 0.8 percent of regional GDP.
In Iran, the estimated decline in the Human Development Index is equivalent to one to one and a half years of progress lost. In other countries, human development losses under a short duration scenario range from weeks to months of foregone development progress, but could escalate significantly if disruptions persist, particularly in economies reliant on remittances, imported energy and food. Losses are most pronounced in South Asia, reflecting higher exposure to income and price shocks and more limited policy buffers, while East and Southeast Asia experience comparatively smaller setbacks.
Governments across the region have responded rapidly to cushion the domestic shocks through fuel price stabilization, targeted subsidies, limits on transport, and early adaptive measures such as diversifying energy supply and improving energy efficiency. In some countries, responses have included nationwide energy saving campaigns and temporary changes to public sector work arrangements to ease pressure on fuel consumption and public budgets.
“The strain this war is placing across Asia-Pacific is already visible. It is reaching households faster than policy can adjust. Despite the recent ceasefire, the resulting prolonged volatility in global markets is imposing increasingly difficult tradeoffs between stabilizing prices, supporting vulnerable households, and maintaining essential public services and market investments. At the same time, we see important opportunities for countries to accelerate long term resilience through adaptive social protection, stronger local and regional value chains, and diversified energy and food systems,” said Kanni Wignaraja, UN Assistant Secretary General and UNDP Regional Director for Asia and the Pacific.
The report is part of a series of socio-economic analyses produced by UNDP to support policymakers unpack the human development consequences of the current conflict, and identify options for a development response as a first line of defense.
“This is not about regular economic management measures, but a broader test of whether countries can look ahead and adapt fast to protect human development and human security gains in a far more volatile and insecure world.” Wignaraja said.
LINK TO REPORT: Military Escalation in the Middle East: Human Development Impact Across Asia and the Pacific
