With summer approaching, countries in Southeast Asia are experiencing economic strain due to rising prices and complications from the ongoing conflict with Iran. Thailand and Vietnam, heavily dependent on tourism, are seeing their peak travel season threatened by high jet fuel costs and uncertainties in the ceasefire, leading to flight cancellations and increased fares.
Tourism in Asia has struggled to recover from the effects of the COVID-19 pandemic. The current conflict exacerbates issues with global energy supplies, affecting Asia significantly. The increased cost at gas stations and grocery stores worldwide has prompted many to reconsider travel plans, leading to fewer visitors in popular destinations.
“With gasoline prices rising and tourism declining, how can we make money?” asked Siv Pech, a tuk-tuk driver in Siem Reap, Cambodia.
Tourism plays a crucial role in the economies of several developing nations. In Thailand, it accounts for nearly 13% of the GDP, and in Vietnam, it contributes almost 9%. It supports millions of jobs in Cambodia and brings vital foreign currency to import-reliant countries like the Philippines and Nepal.
The pressure from war-driven oil price spikes is evident as Southeast Asian countries face rising costs for fuel imports. Jitsai Santaputra from The Lantau Group stated that the survival of tourism businesses hinges on how they manage amidst these challenges, suggesting a grim outlook within five years after the pandemic.
The Impact on Airlines
Issues like jet fuel shortages and rising costs have led airlines such as Vietnam Airlines and Cathay Pacific to cut flights and adjust schedules. European carriers encounter similar troubles. Closure of airspace in the Persian Gulf and disruptions at Gulf airports have forced longer, costlier detours for flights headed to Asia.
An example of fare increases is Cathay Pacific’s fuel surcharges, with medium-haul flights rising from 264 Hong Kong dollars ($34) to 633 Hong Kong dollars ($80). Travelers are booking flights closer to their departure dates, indicating unease in the market.
Sandra Awodele, a travel writer from Washington, planned a vacation to Thailand, but high airfares stopped her plans. Rising fuel prices have also hit drivers in Southeast Asia hard, with Pech, the Cambodian tuk-tuk driver, now earning significantly less.
The Broader Economic Impact
Tourism was nearly 11% of ASEAN’s economic activity in 2019 according to the World Travel and Tourism Council. Moody’s Analytics estimated that the war could reduce economic growth in the Asia-Pacific by 0.1 to 0.4 percentage points in 2026.
Higher travel costs and declining confidence could affect jobs, income, and foreign exchange significantly. Travel disconnects quickly in tough economic times, leading travelers to swap luxury for midrange options, as noted by Le Tuyet Lan in Vietnam.
“This will disrupt the whole industry,” she noted.
The Struggle for Tourism-Dependent Nations
Thailand, a major tourist destination, faces declining visitor numbers, with a 7% drop year-on-year in April. European arrivals decreased by 16% while Middle Eastern visitors plunged by 57%, according to the Thai Ministry of Tourism and Sports.
In Cambodia, Sambo Sokha, owner of a restaurant in Siem Reap, struggles with increased cooking gas prices. Her business is less profitable, and she finds it challenging to cover her staff’s salaries. A recorded 37.5% drop in visitors in the first four months of 2026 compared to the previous year further strains her business.
The current situation has wide-reaching consequences for economies that rely heavily on tourism.
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Additional reporting by Chan from Hong Kong with contributions from writers in Hanoi and Phnom Penh, and Las Vegas.
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