Soaring prices linked to the US-Israeli war on Iran are straining tourism-dependent economies across Southeast Asia, putting the region’s peak summer season at risk, the Associated Press reported on May 31.
Elevated jet fuel costs and ceasefire uncertainty have prompted flight cancellations and higher ticket prices, with the region’s tourism sector still short of a full recovery from the COVID-19 pandemic. The war’s disruption to global energy supplies has hit Asia first and hardest, the report said.
Tourism contributes nearly 13% of GDP in Thailand and close to 9% in Vietnam, and underpins millions of jobs in Cambodia. Those revenues have become more critical as war-driven oil price spikes raise fuel import costs, particularly for economies that relied on the Strait of Hormuz off Iran’s coast as a conduit for oil and gas.
Visitor numbers to Thailand fell 7% year on year in April, while European arrivals dropped almost 16% and Middle Eastern arrivals sank 57%, according to the country’s Ministry of Tourism and Sports.
Jet fuel crisis
Jet fuel shortages and rising costs have led Vietnam Airlines, the Malaysia-based AirAsia group and Hong Kong’s Cathay Pacific to cut flights or adjust schedules. Airspace closures across the Persian Gulf early in the war, along with intermittent Gulf airport closures, severed key layover points for Asia-bound flights or forced longer, costlier routes.
Cathay Pacific’s fuel surcharge for medium-haul flights has risen to HKD633 ($80) from HKD264 ($34) before the war, while the long-haul surcharge increased to HKD1,362 ($174) from HKD569 ($73).
“Jet fuel prices remain at highly elevated levels,” Cathay chief customer and commercial officer Lavinia Lau said, adding that travellers were booking closer to departure, a sign of growing unease.
An analysis by Moody’s Analytics estimated the war would reduce economic growth across the Asia-Pacific region by 0.1 to 0.4 percentage points in 2026.
“The conflict will weigh on growth mainly through higher production costs and consumer prices, along with weaker external demand from trade and tourism,” Asian Development Bank chief economist Albert Park said.
In Siem Reap, home to Cambodia’s Angkor Wat, recorded international and domestic visitors fell 37.5% in the first four months of 2026 against the same period last year, according to the provincial tourism department.
“With gasoline prices rising and tourism declining, how can we make money?” said Siv Pech, a 58-year-old tuk-tuk driver in the city, who said daily earnings had fallen to about $5 from up to $20 before the downturn.
Why it matters for the trade
Thailand’s Middle Eastern arrivals fell 57% in April. That is a source market disappearing, and it should worry any operator with product weighted towards Gulf-origin travellers into Southeast Asia. The war is not only raising costs, it is changing where demand comes from, and the exposure is live now.
Cathay’s surcharge numbers show the cost mechanics plainly. Medium-haul surcharges have more than doubled and long-haul has climbed by a similar margin. The fuel component is now big enough to change whether a traveller books at all, which is why Cathay is seeing people commit closer to departure. For agents, the job shifts from selling a destination to defending the total trip price.
The trading-down effect carries the structural risk. As fuel costs feed through, luxury travellers move to midrange, midrange to budget, and the budget tier has nowhere left to go. That tier carries the most jobs in Cambodia and Vietnam, so it takes the hardest hit. Midrange hotels might pick up downgraders for a while before the same pressure catches them.
Southeast Asia’s fuel imports run through the Strait of Hormuz, the same waterway at the centre of the unresolved ceasefire. The region’s tourism cost base depends on a chokepoint it cannot influence. Until Hormuz settles, every forecast for the peak season comes with a geopolitical caveat.
Watch points
Whether the Middle Eastern arrivals drop holds will show if this is a travel pause or a lasting reroute of Gulf spend away from Asia. Whether more carriers follow Cathay, Vietnam Airlines and AirAsia in cutting capacity will decide if thinner airlift pushes fares higher again. The pace of any Hormuz settlement sits upstream of all of it. Watch too whether tourism boards turn to discounting or chase India and domestic demand to backfill lost Gulf and European volume.