West Asia Crisis to Keep Oil Prices High for Longer, Says ADB Chief Economist

Crude oil prices are expected to remain elevated for an extended period due to disruptions caused by the prolonged Middle East crisis, according to Albert Park.

"With a higher oil price expectation, we actually have it as USD 96 per barrel as average for 2026 as per the new reference scenario. It should stay elevated at USD 80 per barrel in 2027. So, our idea is that the oil prices are likely to stay higher for longer," Park told PTI in an interview.

He noted that futures markets are indicating higher prices extending further into next year than previously expected.

However, he added, "We have also seen always a kind of a premium of the spot market prices and the nearby futures market because there is such a shortage currently."

Speaking about the impact of the ongoing Middle East crisis on India, Park said it could shave 0.6 percentage points off the country’s GDP growth, reducing it to 6.3 per cent, while also significantly pushing up inflation during the current financial year.

In April, the Asian Development Bank projected India’s GDP growth to remain “robust” at 6.9 per cent in the current fiscal year and rise to 7.3 per cent in the next, driven by strong domestic demand. The bank had also forecast inflation at 4.5 per cent for the current fiscal.

For India, Park said, "We do find that growth would be lower by 0.6 per cent (FY27). This is based on our model scenario. But it would not negatively affect growth next year. India would kind of bounce back next."

He added that inflation could rise by 2.4 percentage points this year to 6.9 per cent.

"So that's a bit higher than the inflation impacts for the region (Asia-Pacific), because India is more reliant on imported oil and gas. The growth effect, if you take out China, this negative 0.6 per cent on growth this year is pretty similar to the region as a whole region as well," he said.

On April 29, the ADB, in a special update, lowered its Asia-Pacific growth forecast for 2026 to 4.7 per cent from the earlier 5.1 per cent, citing prolonged disruptions in West Asia.

Asked about the impact of El Niño on food production, Park said, "Of course, it's very uncertain. Obviously, whenever there's a bad harvest in India, we have an issue. With higher prices. India accounts for a huge part of the global trade in rice. So then whatever happens in India also often has a big impact on other countries."

He added that rising fertiliser prices were another major concern.

According to Park, higher fertiliser costs could force farmers to reduce usage, which may lower crop yields and affect food availability later in the year.

He said this would inevitably influence food prices, though the extent would depend on the severity of gas supply disruptions.

(with PTI inputs)