Geopolitical Rupture and Inflationary Contagion: Sectoral Vulnerabilities in Asia Following the 2026 Iran War

The 2026 Iran War triggered significant geopolitical disruptions, particularly impacting Asian economies that rely on energy transit through the Strait of Hormuz. Such disruptions can generate inflationary pressures that extend beyond the energy sector into production, distribution, and food systems. This study examines how these war-related cost pressures are transmitted across sectors and into national inflation in ten selected Asian economies. Using an input-output (I-O) framework, this study analyzes how energy price shocks and supply chain disruptions spread inflationary pressures across energy-intensive sectors in ten selected Asian economies. The findings show clear differences across selected economies. Pakistan and Bangladesh emerge as the most vulnerable, with the highest crisis-adjusted inflation and stronger price effects in agriculture and food-related sectors. In contrast, Thailand and Sri Lanka show relatively smaller effects. Sectoral transmission is broad, with real estate, transport services, and trade consistently among the most affected sectors. Overall, the results indicate that geopolitical energy disruptions can intensify inflation through production and distribution networks, with important implications for food affordability and household welfare.