Beyond the Mekong | Economy | Southeast Asia

Reevaluating ASEAN’s Economic Outlook Amid the Iran Conflict

Marcus Tantau from Templeton Research offers fresh insights into the region’s economies as they reel from the impacts of the Hormuz oil crisis.

Marcus Tantau, a senior associate at Templeton Research, returns to Beyond the Mekong for an update on the outlook for ASEAN economies as the crisis in the Middle East persists with the costs of the Israel-U.S. war on Iran hitting government expenditure across the region.

The cost of oil and shipping remains key. The World Bank had cut around one percentage point off regional GDP forecasts for the year, but this could rise substantially in the event of a severe, long term blockade of the Strait of Hormuz. That, combined with inflationary costs, has raised the prospect of stagflation, a significant problem for economists and politicians attempting to steer economies through turbulent times.

“But it’s also got to do with the sort of deceleration of China,” Tantau said, adding China has downgraded its growth target from 5.0 percent to 4.5-5.0 percent. “So that obviously has a flow on effect throughout the region and beyond.”

Tantau spoke with The Diplomat’s Luke Hunt about ASEAN’s outlook for 2026 in January. For this update he has revised his numbers. Tantau lists the region’s least developed countries as the most vulnerable but notes Indonesia is also troubled by its pricing structure for oil imports.

“It’s important to say that every single market has a different dependency on these [oil] imports,” he said. “So it’s a different story across the region.”

Tantau includes the latest revised outlooks from Moody’s and Fitch ratings agencies and a warning from MSCI that it might downgrade Indonesia from an emerging market to a frontier market given its current standing.

It’s all part of an unprecedented upheaval that has governments scrambling to secure energy supplies, including Australian Prime Minister Anthony Albanese, who recently traveled to Brunei, Singapore, and Malaysia in what’s being dubbed “diesel diplomacy.”

Prior to joining Templeton Research, Marcus was based in Hong Kong with a leading due diligence firm. Earlier in his career, he served with the Singapore Ministry of Foreign Affairs in Canberra and spent several years in Jakarta working in the logistics industry.

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Marcus Tantau, a senior associate at Templeton Research, returns to Beyond the Mekong for an update on the outlook for ASEAN economies as the crisis in the Middle East persists with the costs of the Israel-U.S. war on Iran hitting government expenditure across the region.

The cost of oil and shipping remains key. The World Bank had cut around one percentage point off regional GDP forecasts for the year, but this could rise substantially in the event of a severe, long term blockade of the Strait of Hormuz. That, combined with inflationary costs, has raised the prospect of stagflation, a significant problem for economists and politicians attempting to steer economies through turbulent times.

“But it’s also got to do with the sort of deceleration of China,” Tantau said, adding China has downgraded its growth target from 5.0 percent to 4.5-5.0 percent. “So that obviously has a flow on effect throughout the region and beyond.”

Tantau spoke with The Diplomat’s Luke Hunt about ASEAN’s outlook for 2026 in January. For this update he has revised his numbers. Tantau lists the region’s least developed countries as the most vulnerable but notes Indonesia is also troubled by its pricing structure for oil imports.

“It’s important to say that every single market has a different dependency on these [oil] imports,” he said. “So it’s a different story across the region.”

Tantau includes the latest revised outlooks from Moody’s and Fitch ratings agencies and a warning from MSCI that it might downgrade Indonesia from an emerging market to a frontier market given its current standing.

It’s all part of an unprecedented upheaval that has governments scrambling to secure energy supplies, including Australian Prime Minister Anthony Albanese, who recently traveled to Brunei, Singapore, and Malaysia in what’s being dubbed “diesel diplomacy.”

Prior to joining Templeton Research, Marcus was based in Hong Kong with a leading due diligence firm. Earlier in his career, he served with the Singapore Ministry of Foreign Affairs in Canberra and spent several years in Jakarta working in the logistics industry.

Luke Hunt is a Southeast Asia correspondent for The Diplomat. He has spent three decades working in the region and produces the Beyond the Mekong podcast. He can be followed on Patreon and X – formerly Twitter.

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