The Asian Development Bank (ADB) has forecasted that oil prices are expected to average $96 per barrel in 2026, surpassing the pre-war average of $69 due to significant infrastructure damage. Despite the ceasefire in the Middle East, transit through the Strait of Hormuz has not resumed, contributing to this projection.
An updated analysis by the ADB indicates that prices may moderate to an average of $80 in 2027. The rise in fertilizer prices, particularly urea, a crucial crop nutrient, has also led to inflationary expectations and increased fiscal pressure on nations, especially those reliant on energy and fertilizer imports like Bangladesh.
The ADB has revised its 2026 growth projections for developing Asia and the Pacific region downwards, attributing the disruption caused by the conflict in the Middle East. The forecasted regional GDP growth now stands at 4.7 percent, a 0.4 percentage-point decline, with the inflation estimate raised by 1.6 percentage points to 5.2 percent.
Albert Park, the ADB Chief Economist, highlighted the ongoing challenges related to transit through the Strait of Hormuz and the prolonged supply disruptions expected in the energy sector across the Gulf region. This situation is anticipated to impact growth and inflation significantly, with repair timelines for damaged facilities extending over several years.
During a media briefing at the ADB Annual Meeting in Uzbekistan, Park emphasized that the severity of the impacts would vary based on factors such as energy dependency, fertilizers imports, and other economy-specific conditions. Notably, South Asia, the Pacific, and developing Southeast Asia have experienced the most significant growth downgrades for 2026.
The ADB now projects a growth rate of 5.7 percent for South Asia in 2026, down from the previous forecast of 6.3 percent, with inflation expected to rise to 7.6 percent. The agency highlighted the upward pressure on non-oil commodity prices, especially fertilizers, due to supply disruptions.
To address these challenges, the ADB recommended targeted policies, such as avoiding broad fuel subsidies and excise tax cuts. Park emphasized the importance of supporting vulnerable households, maintaining monetary credibility, and investing in energy resilience to navigate the current supply shock effectively.