The WBG said in its East Asia and Pacific Economic Update on Tuesday that the
U.S.-Iran war has lifted global energy prices and EAP economies have responded
more aggressively than other regions, leaning heavily on subsidies — a strategy
the bank warns may be unsustainable. It projects Middle East oil exports will
not return to pre-conflict levels until mid-2027. The WBG cautioned that if the
shock is persistent rather than temporary, subsidy measures could delay
necessary adjustments, raise fiscal costs and deplete FX reserves. It cited
Indonesia, Thailand and Vietnam as examples, noting each has cut retail gasoline
prices and their USD reserves have fallen 15–40% YTD. The bank added that energy
risks are currently being offset by an "AI tailwind."
