The Middle East conflict may push Gulf and Asian economies towards closer strategic investment links as they seek to reduce energy supply and logistics risks, according to Jihad Azour, director of the International Monetary Fund’s Middle East and Central Asia Department.
Speaking at a webinar after the IMF released the latest update to its World Economic Outlook, Azour said the global economy had so far proved more resilient than feared, despite the negative supply shock from the war in the Gulf.
The IMF has forecast global growth of 3% this year and 3.4% in 2027, with higher energy, fertiliser and food prices partly offset by stronger demand linked to artificial intelligence and global technology value chains.
Azour identified Pakistan, Sri Lanka and Indonesia as among the Asian economies most affected by fallout from the Middle East war because of their dependence on Gulf energy imports and more limited buffers.
He contrasted them with China, which he said had greater flexibility to use reserves and had prepared better for such shocks. Economies such as Korea and Vietnam had also been better able to absorb the shock because of stronger technology and AI-related demand.
“The relationship between the Gulf countries and Asia need to be redefined,” Azour said, adding that both sides needed to think more strategically about joint investment to reduce risk.
He noted that Gulf countries are already looking at ways to reduce dependence on the Strait of Hormuz, including alternative export routes and infrastructure links. For Asian economies, the conflict is likely to accelerate efforts to diversify energy supplies.
He said the conflict had shown that the Gulf’s role in global supply chains extended beyond crude oil and gas to fertilisers, jet fuel, logistics, aviation and regional connectivity.
According to Azour, Gulf sovereign wealth funds are unlikely to retreat significantly from Asian markets despite possible pressure to support domestic and regional resilience projects.
“I don’t see a major change in the strategies,” he said. “I see that international global assets will remain the major source of investment destination for those funds.”
