The war on Iran has severe economic implications for South Asia, where millions of migrant workers in the Gulf region send vital remittances back to their families. The US-Israel-Iran war has disrupted the Gulf region and beyond, affecting South Asian migrant workers’ job stability and threatening the remittance income that is crucial for their families and governments.
South Asia’s Dependence On Gulf Labor Markets
South Asia has a significant dependence on labor markets in the Gulf region for jobs and remittances. According to the East Asia Forum, there are many South Asian migrant workers in the Gulf region, concentrated in the private sector, and constituting a sizeable share of the workforce in sectors most affected by the war, including transport, logistics, tourism, hospitality, infrastructure, fishing, and low-wage urban services. The war has increased energy and transport costs for South Asian nations, worsening inflation and slowing economic growth.
Remittances And Energy Dependence
Remittances from Gulf migrants are a vital source of income for their families at home and essential for South Asian governments. The East Asia Forum reports that sending labor to the Gulf helps governments’ balance of payments by boosting foreign exchange reserves, offsetting trade deficits, and stabilizing the economy. The conflict has disrupted energy exports, damaged infrastructure, and lowered tourist visits, straining budgets and household finances. Smaller nations like Nepal are highly dependent on remittances, which accounted for 33.1 percent of GDP in 2024.
Government Responses And Mitigation Efforts
Pakistan is playing a diplomatic role in mediating US-Iran tensions, while India is diversifying its trade relationships amid ongoing trade negotiations with Washington, according to the Asia Society Policy Institute. Bangladesh and Nepal have ushered in new political leadership, creating fresh questions about their domestic priorities and foreign policy orientations. The World Bank has downgraded growth in the Gulf Cooperation Council, which will have wider consequences for migrants and countries that rely heavily on remittances from the Gulf.
Long-Term Implications And Risks
The war’s spillover effects could trigger disruptive migration patterns, altering South Asia’s demographic and economic landscape. The economic impact of the conflict varies across the Gulf countries, with a projected slowing from 4.4 percent in 2025 to 1.3 percent in 2026. The conflict has already disrupted commodity flows, adding to the region’s economic strain. Governments must balance supporting vulnerable workers with managing rising domestic costs amid shrinking remittances. As the Asia Society Policy Institute notes, the region’s economic resilience is being tested, particularly given South Asia’s dependence on imported energy. The next steps for South Asian governments will be crucial in mitigating the economic fallout and ensuring the region’s financial stability.
Sources
- The war on Iran hits South Asian pockets
- South Asia
- South Asia in a Shifting World Order: What Comes Next?
- Bitter Hackers Deploy New PapRAT Backdoor in Cyberespionage Campaign Targeting South Asia
- The Politics of Pandemic Preparedness: Why South and Southeast Asia Need a Stronger Voice
- Asia not riding but building the AI boom – GIS Reports
Photo: Calistemon (CC BY-SA 4.0)
