Asia is staring at a deeper energy shock as the ongoing West Asia conflict disrupts supplies and drives up oil and gas prices, prompting downgrades to growth forecasts and higher inflation expectations across the region, according to a latest report by Goldman Sachs. 

The report flagged that the near-term disruption in the Strait of Hormuz is likely to keep energy markets tight, with crude prices expected to remain elevated in the coming months. “Our commodities research team has updated its oil and gas price forecasts to reflect a longer disruption to flows via the Strait of Hormuz in the short term and higher strategic stockpiling in the medium term. We now expect the near-shutdown of Hormuz flows to extend into mid-April before normalizing over the following 30 days, with Brent oil prices to average $105 in March and $115 in April before falling to $80/bbl in Q4 (previously $71/bbl).” 

The tighter supply conditions are expected to significantly raise Asia’s energy import bill. Goldman Sachs estimates that the revision implies a nearly 30% increase in average crude prices for Asian buyers this year, alongside an 18% rise in natural gas prices. 

India among most exposed economies 

The report highlights that countries with high dependence on imported energy and relatively lower income levels are more vulnerable to both price shocks and potential shortages. India features prominently in this group. 

“We would therefore expect lower-income economies with larger imported energy needs to face the highest shortage risks… Thailand and India at the top, followed by Vietnam, Philippines, and Indonesia.” 

The impact is already visible in macro projections. Goldman Sachs has raised India’s inflation forecast while cutting its growth outlook, reflecting the drag from higher fuel costs and external pressures. 

Inflation up, growth trimmed 

Across Asia, inflation forecasts have been revised upward, with the agency estimating an average increase of 0.6 percentage points on higher energy prices. 

“We increase CPI inflation forecasts by an average of 0.6pp (implying a cumulative upgrade of just over 1pp since the start of the conflict)… New cuts to our growth forecasts are negligible in Japan, China, Korea, and Taiwan, but more than 0.5pp in India, Philippines, Thailand, and Singapore.” 

For India specifically, GDP growth is now seen slowing to 5.9% in 2026 from an earlier expectation of 7% while inflation is projected to rise to 4.6%. Higher import costs are also expected to widen current account deficits across the region, with India likely to see a deficit of over 2% of GDP this year. 

Policy shift underway 

Governments and central banks across Asia are likely to respond with a mix of fiscal support and tighter monetary policy. “We expect looser fiscal policy across the region, as governments attempt to cushion the impact of higher energy costs on consumers… fiscal subsidy costs look as if they could be on the order of 0.2-0.5% of GDP this year in a number of regional economies.” 

At the same time, central banks may lean towards tightening to manage inflation and currency pressures. Goldman Sachs expects rate hikes in India and the Philippines while also noting increased currency intervention in several economies. 

Risks remain tilted upward 

The report cautioned that uncertainty around the duration of the conflict remains high, with risks skewed towards even higher energy prices if disruptions persist longer than expected. “Risks to our new disruption forecast are two-sided… but still skewed to the upside in terms of the length of disruption and upside to energy prices, in our view.” 

Any further escalation could deepen the growth slowdown across Asia, with markets increasingly likely to interpret worsening conditions as negative for growth rather than just inflationary, the report added.