Gulf War III squeezes tourism-dependent economies across Southeast Asia

Soaring prices linked to the war with Iran are straining tourism-dependent economies across Southeast Asia, putting the region's peak summer season at risk, Emerging Travel reported citing AP and Moody’s data on May 31.

Elevated jet fuel costs and ceasefire uncertainty have prompted flight cancellations and higher ticket prices, with the regional sector still short of a full recovery from the COVID-19 pandemic. The war's disruption to global energy supplies has hit Asia first and hardest with tourism numbers significantly reduced from the beginning of the year, according to the researched data. 

Tourism contributes nearly 13% of GDP in Thailand and close to 9% in Vietnam, and underpins millions of jobs in Cambodia. Those revenues have become more critical as war-driven oil price spikes raise fuel import costs, particularly for economies dependent on the Strait of Hormuz off Iran's coast as a conduit for oil and gas.

Visitor numbers to Thailand fell 7% year on year in April, while European arrivals dropped almost 16% and Middle Eastern arrivals sank 57%, according to the country's Ministry of Tourism and Sports.

Jet fuel shortages and rising costs have led Vietnam Airlines, the Malaysia-based AirAsia group and Hong Kong's Cathay Pacific to cut flights or adjust schedules. Airspace closures across the Persian Gulf early in the war, along with intermittent Gulf airport closures, severed key layover points for Asia-bound flights or forced longer, costlier routes.

Cathay Pacific's fuel surcharge for medium-haul flights has risen to HKD633 ($80) from HKD264 ($34) before the war, while the long-haul surcharge increased to HKD1,362 ($174) from HKD569 ($73).

An analysis by Moody's Analytics estimated the war would reduce economic growth across the Asia-Pacific region by 0.1 to 0.4 percentage points in 2026.

"The conflict will weigh on growth mainly through higher production costs and consumer prices, along with weaker external demand from trade and tourism," Asian Development Bank chief economist Albert Park said.

In Siem Reap, home to Cambodia's Angkor Wat, recorded international and domestic visitors fell 37.5% in the first four months of 2026 against the same period a year earlier, according to the provincial tourism department.

Ongoing tensions in the Strait of Hormuz among the US, Iran and Oman have continued to cast doubt on any near-term recovery, with the outcome between Tehran and Washington not yet clear.