The Asian Development Bank has cautioned that ongoing conflicts and severe weather patterns are intensifying price pressures across Asia, potentially fueling inflation well into next year and keeping central banks on high alert. In its latest regional outlook released Wednesday, the lender highlighted that renewed hostilities involving Iran and the spread of fighting to Yemen have disrupted crude oil and refined product supplies, while the Russia-Ukraine war continues to hamper grain shipments.

The El Nino-driven extreme weather has already threatened crop harvests from India to Thailand, reduced hydropower generation, and even restricted passage through critical waterways such as the Panama Canal. ADB Chief Economist Albert Park noted in the report that "risks remain tilted to the downside," adding that any further escalation of conflicts or a stronger-than-expected El Nino impact could suppress economic growth and push inflation higher. The bank now projects inflation for developing Asia-Pacific economies at 4.2% this year and 3.5% in 2026, both significantly above the 3% level anticipated for 2025.

The ADB expects economic growth to slow from 5.5% to 5% next year, while raising its oil price forecast for this year and next to $90 and $78 per barrel, respectively. Although broad subsidy measures have helped cushion consumers from the immediate shock this year, the lender stated that persistently high energy costs are beginning to weigh on economies, with the impact likely most pronounced in nations where food consumption accounts for a large share of household spending, such as those in South Asia.

Should inflation remain sticky, several economies—including Bangladesh, India, Indonesia, Pakistan, the Philippines, and Vietnam—still have room to tighten monetary policy further this year. However, the bank noted that once price pressures subside, policymakers may begin considering rate cuts as early as 2027. "Overall, policy rates are expected to gradually return to levels seen before the escalation of Middle East conflicts, but the pace and scale of easing will depend on how inflation, growth, and external risks evolve," the ADB concluded.