South Asia’s moment of responsibility

As conflict once again engulfs the Middle East, the strategic shockwaves are already rippling far beyond the immediate theatre.

While the war’s epicenter lies around Iran, affecting the Middle East and at arm’s length the West, the economic aftershocks are steadily advancing toward South Asia.

Rising oil prices, a strengthening dollar, disrupted trade routes, and renewed geopolitical polarization threaten to place enormous strain on the fragile economies of the region. Yet South Asia—home to nearly a quarter of humanity—remains largely a spectator. This moment demands more than routine diplomatic statements or point-scoring in exposition of loyalty and subordination. It calls for a coordinated and a practical response to cushion economic shocks and contribute to regional stability.

Paradoxically, there is a strategic vacuum in South Asia. Unlike the Middle Eastern bloc and the Western bloc, which unite and come up with one voice under a common threat, South Asia is not a bloc nor has one voice. It is a fragmented region of nations working on bilateralism and ad-hoc need-based alliances.

South Asia lacks a unified geopolitical voice and this is region’s greatest weakness. The regional organization South Asian Association for Regional Cooperation (SAARC) has remained largely dormant for years due to petty political tensions among its major members. Yet crises often force dormant institutions to rediscover relevance. The Iran war presents precisely such a moment.

Unlike the major powers—the United States, Russia, or China—South Asian countries are not principal actors in the conflict. This relative neutrality places them in a unique position: they can engage with all sides without appearing partisan.

Energy lifelines, maritime trade routes, and financial flows bind South Asia closely to the Gulf.

Nearly 70 percent of South Asia’s oil imports originate from the broader Middle East. Any disruption in tanker routes through the Strait of Hormuz, or the surge in global energy prices that accompanies war, will immediately transmit inflation into the region’s economies.

Countries such as Pakistan, India, Bangladesh, and Sri Lanka already grapple with fragile fiscal balances and volatile currencies.

War typically strengthens the US dollar as investors seek safe assets. For heavily indebted South Asian economies, a stronger dollar means higher debt servicing costs, expensive imports, and shrinking foreign exchange reserves. The region’s already fragile social equilibrium—shaped by inflation, unemployment, and inequality—could easily deteriorate under prolonged external pressure.

South Asia contains one of the largest concentrations of poor people in the world, and this singular social reality significantly shapes how external shocks—like a war involving Iran—can affect the region.

India has made major progress in reducing extreme poverty in the past decade. Extreme poverty declined from 27.1 percent in 2011–12 to about 5.3 percent in 2022–23, according to World Bank data. Yet because of its huge population, India still has around 234 million people living in poverty, the largest number in the world.

Pakistan’s poverty situation is significantly more fragile.

Around 44.7 percent of the population lives below the USD 4.20/day poverty line, according to a World Bank assessment.

Bangladesh has been one of the more successful poverty-reduction stories in South Asia.

Poverty declined from 30.5 percent in 2014 to around 11.5 percent in 2022.

Bangladesh remains highly exposed to external shocks because of its dependence on energy imports and global trade.

South Asia has roughly 380 million poor people, one of the largest poverty concentrations globally. Many live just above the poverty line, meaning small increases in prices can push millions into poverty.

Millions of people from South Asia work in the Middle East. Remittances from these workers are crucial. Pakistan receives around USD 30+ billion annually,

Bangladesh around USD 20 billion, and India over USD 100 billion. If regional instability affects employment or forces evacuation, remittance flows could fall, directly impacting poor households.

In essence, South Asia’s vulnerability lies not in military exposure but in economic fragility combined with massive populations living close to poverty. This makes the region extremely vulnerable to global economic disruptions such as war-driven energy shocks.

Thus, the notion that South Asia stands outside the conflict is an illusion. Economically, the region is directly exposed.

The most immediate vulnerability for South Asia is energy. Rather than scrambling individually for oil supplies in a tightening global market, South Asian countries could coordinate their energy purchasing strategies.

Equally important is the creation of a shared strategic petroleum reserve mechanism. While large economies such as India maintain strategic oil reserves, smaller states like Bangladesh or Sri Lanka remain highly vulnerable to supply shocks. A regional storage and emergency distribution arrangement could cushion sudden disruptions.

Another tangible role for South Asia lies in maritime security and trade logistics. The Indian Ocean shipping lanes are among the busiest in the world, linking Middle Eastern energy to Asian markets. Increased tensions in the Persian Gulf have spilled into these maritime corridors. The most recent sinking of an Iranian ship, on its way back from India, with a torpedo by the US in the waters of Indian Ocean is an event to reckon that the war could spin at South Asia door steps.

A cooperative maritime monitoring arrangement involving regional navies—particularly those of India, Pakistan, and Sri Lanka—could help secure critical shipping lanes in the northern Indian Ocean. Even limited coordination on information sharing, piracy monitoring, and tanker safety could significantly reduce commercial risk premiums. Such practical cooperation would deliver tangible benefits without entangling the region directly in the conflict.

The Iran war is another reminder that in an interconnected world, geography offers little protection from global crises. South Asia, despite its enormous population and economic weight, often behaves like a geopolitical spectator. Yet crises also create opportunities for regions to redefine their relevance.

By collectively coordinating energy security, safeguarding trade routes, strengthening financial resilience, protecting migrant workers, and facilitating discreet diplomacy, South Asia could transform itself from a passive observer into a stabilising force.

This would not require grand alliances or military interventions—only pragmatic cooperation and political will.

If the region continues to respond with routine diplomatic statements alone, it will remain vulnerable to every geopolitical storm that blows across the Middle East. But if it acts collectively, South Asia could turn a moment of global instability into an opportunity for regional maturity. And in doing so, it may finally discover that true geopolitical influence often begins not with power—but with responsibility.

Copyright Business Recorder, 2026