Asia will face sustained inflation pressure into 2027 due to wars in Europe and the Middle East and a severe El Niño, the Asian Development Bank warned Wednesday. The re-escalation of fighting in Iran and the spread of conflict to Yemen have choked crude and refined product supplies, while Russia's war on Ukraine has disrupted grain shipments. Abnormal weather from El Niño threatens harvests from India to Thailand, reduces hydropower generation, and restricts traffic in waterways like the Panama Canal. "Risks remain tilted to the downside," ADB chief economist Albert Park said. "Further escalation of conflicts or worse than expected El Niño impacts could dent growth and push inflation higher."

The ADB forecasts inflation for developing Asia-Pacific at 4.2% this year and 3.5% next year, both above the 3% recorded in 2025. Economic growth is expected to slow to 5% in 2026 from 5.5%. The bank raised oil-price forecasts to $90 and $78 a barrel for this year and next. Persistently high energy prices are working through economies, with the strongest pass-through in countries where food weighs heavily in consumption baskets, such as South Asia. Several economies have scope for further monetary tightening this year if inflation persists, including Bangladesh, India, Indonesia, Pakistan, the Philippines, and Vietnam. Policymakers may weigh rate cuts in 2027 once inflation recedes.