Rising geopolitical tensions in the Middle East are testing the resilience of global systems, including peace, trade and energy markets. As a major supplier of oil and gas and a key global trade route, disruptions in the region create serious challenges for countries that depend on imported energy. For many developing economies, this leads to higher energy prices, increased transport costs and growing economic pressure. South Asian countries are particularly vulnerable due to their strong reliance on external energy supplies. 

The ongoing military conflict involving the Islamic Republic of Iran have sent shockwaves through global energy markets. Brent crude oil prices rose above US$100 per barrel in early March 2026, reaching about US$120 on 6 March before falling slightly, still the highest level since the 2008 oil price spike (Fig. 1), as concerns grew about potential disruptions to energy flows through the Strait of Hormuz, one of the world’s most critical energy chokepoints. Nearly 20 million barrels of oil pass through the Strait every day, accounting for roughly one-fifth of global petroleum trade (Fig. 2).

For South Asia, the current tensions are not distant geopolitical events, they direct impact on overall economies as major share of energy comes from the oil. Past experience shows how volatile oil prices can trigger instability in Sri Lanka and countries such as Maldives and Pakistan have also faced economic pressure. Qatar and the United Arab Emirates supply almost all LNG imports for Pakistan, about 72% for Bangladesh. India also relies heavily on Middle Eastern energy, with nearly half of its crude oil imports and a significant share of LNG and LPG through the Strait of Hormuz.

Such dependence creates significant vulnerability. Even short supply disruptions or price spikes can quickly increase energy costs across the region. Over time, these pressures can weaken the balance of payments, raise inflation and affect exchange rates. For many South Asian countries, where reliable and affordable energy is essential for development, the impacts of energy shocks extend beyond the energy sectoraffecting transport, manufacturing, agriculture and services, often slowing growth and increasing fiscal pressure on governments.

At the same time, the current crisis presents an opportunity for transformation. It highlights the urgent need to reduce reliance on imported fossil fuels and strengthen long-term energy security. While this requires difficult policy choices, it can also support economic resilience and climate goals.

Accelerating the transition to renewable energy offers a triple-wins strategy

First, renewable energy strengthens energy security by reducing dependence on imported fuels and exposure to global price volatility. South Asia has strong renewable potential, from solar power across the region to hydropower in the Himalayas and growing wind energy along coastal areas. Expanding electrification in sectors such as transport and heating can improve efficiency while lowering fossil fuel demand.

Second, clean energy supports economic development. Investments in renewable energy can create jobs, attract private investment, and strengthen domestic industries. Areas such as solar manufacturing, battery technologies, grid modernization, and energy storage offer strong potential for growth and innovation.

Third, renewable energy contributes to public health and environmental sustainability. Air pollution remains a major challenge across South Asian cities. Transitioning to cleaner energy systems can reduce health risks while supporting climate commitments and long-term net-zero goals.

Progress is already underway. Several countries have expanded solar capacity, improved energy efficiency and introduced policies to promote renewable investment. Regional electricity trade is also increasing. Cross-border power exchanges between India, Nepal, Bhutan and Bangladesh show how cooperation can support both energy security and clean energy development.

However, the pace of transition remains uneven. Financing gaps continue to slow renewable deployment, while grid infrastructure in many countries is not yet ready to integrate large-scale renewable energy. Regulatory barriers and investment risks also limit private sector participation.

Recommendations 

Stronger regional cooperation is essential to move forward. Expanding cross-border electricity trade, improving grid connectivity, and sharing technical expertise can reduce costs and meet growing demand. ESCAP plays a key role by providing a neutral platform for policy dialogue, capacity-building and technical support, helping countries address investment barriers and strengthen regulatory frameworks. In an increasingly uncertain global context, energy security cannot depend on fossil fuels alone. For South Asia, advancing green energy is both a climate imperative and a strategic choice to enhance resilience, reduce risks and support sustainable development.