The economic fallout from the escalating Middle East conflict is hitting Asia-Pacific consumers hard, with businesses and households from the Philippines to Australia slashing spending amid soaring fuel costs and mounting uncertainty.
In the Philippines, business confidence plunged in March, per a Bangko Sentral ng Pilipinas (BSP) survey released Saturday. The index cratered to -24.3% from 8.2% in February, while the quarter-ahead reading dropped to -17.3% from 37.4%. Even the 12-month outlook, still positive at 11.7%, marked a steep fall from 51.1%. Consumer confidence remained negative at -15.8% in Q1, improved only slightly from -22.2%.
Retailers are scrambling. Roberto Liu of the Philippine Retailers Association noted efforts with mall partners to curb energy costs, protecting shoppers from the full brunt of fuel hikes. With inflation now pegged at 6.3% for 2026 and Fitch Ratings issuing a negative credit outlook, the sector, employing 10.2 million and contributing 18% of GDP, faces real peril.
Australia shows a similar strain. Commonwealth Bank data revealed a 0.5% drop in its Household Spending Insights Index for February, the first in 17 months, with annual growth slowing to 4.9%, the weakest since August 2025. Utilities fell 6.4%, discretionary spending growth eased to 5.7% from 6.6%, and fuel claimed a bigger slice of transactions. NAB slashed its 2026 consumption forecast to 1% from 2.4% last year, anticipating a Reserve Bank rate hike in May.
This regional pattern stems from the Strait of Hormuz blockade, which disrupted one-fifth of global oil and gas flows. Southeast Asia imports 56% of its crude from the Middle East, driving fuel prices up 68% in spots, per Cushman & Wakefield. The firm now sees 2026 Asia-Pacific growth dipping below 4.0%.
As confidence erodes from Manila to Melbourne, central banks grapple with whether pre-crisis resilience can weather a drawn-out energy crisis or if tighter budgets will derail recoveries.
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