Asia Pacific faces weaker growth and higher inflation from Middle East crisis, ADB warns

The Asian Development Bank (ADB) has warned that the ongoing Middle East crisis could dampen growth and elevate inflation across the Asia Pacific region due to higher oil prices and disrupted trade routes. The transmission mechanism primarily operates through energy cost pass-through and reduced external demand, as elevated crude prices strain import-dependent economies and weigh on consumer spending. Equity markets in energy-importing Asian nations and local currency bonds are particularly vulnerable, given their sensitivity to inflationary pressures and widening current account deficits. A sustained spike in Brent crude above $90 per barrel would exacerbate financial stability risks and prompt further monetary tightening. Traders will closely watch the upcoming ADB inflation update and regional current account data for signs of balance of payments stress.

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