S-E Asia tourism takes hit from Middle East crisis, but intra-regional travel could spell hope

[SINGAPORE] Cancelled flights, fuel shortages, higher prices for ferry tickets – the fallout from the US-Iran-Israel conflict has hit South-east Asia’s tourism industry in more ways than one, almost a month since the onset of the crisis.

The impact on the region’s travel economy is in the early stages and may only get worse in the coming months, said analysts.

“It could get far more treacherous from here,” noted Gary Bowerman, a travel and tourism analyst. “We’ve seen a lot of flight postponements, tour group cancellations, ferry routes suspended, and meetings, incentives, conferences and exhibitions events being rescheduled.”

But a silver lining could emerge from the gloom, as rerouted transit traffic and increased demand for intra-regional travel offer some hope for South-east Asia’s tourism industry.

Suspension of services

Most visibly, the conflict has forced airlines to cancel flights as airspaces in the Middle East undergo disruption. On Feb 28, the day the United States and Israel launched a major joint military operation against Iran, 22.9 per cent of scheduled flights of South-east Asian carriers were cancelled, according to OAG data. Such cancellations have thrown global flight networks into disarray. Travellers have long relied on several Middle Eastern cities as transitory destinations connecting Asia to Europe and North America. Major airports in the Gulf serve about a third of the 125 million travellers between Europe and Asia, for example.

Numerous routes between the Middle East and South-east Asia have been suspended throughout March and April as safety concerns arise, including services in Gulf destinations such as Dubai, Abu Dhabi, Doha and Jeddah. Dubai International Airport was the world’s busiest international airport in 2025, while Doha’s Hamad International Airport ranked among the top 10.

Meanwhile, surging fuel prices have raised operation costs across the region. Jet fuel shortages have already forced airlines in Vietnam and the Philippines to suspend flight services.

Jet A-1 fuel – the most commonly used aviation fuel internationally – has seen prices skyrocket since the onset of the conflict. Prices have almost doubled to above US$197 per barrel in late March from about US$95 prior to the conflict, according to the International Air Transport Association.

Mayur Patel, commercial and industry affairs leader for Asia-Pacific at aviation analytics firm OAG, noted that airlines in Asia have absorbed about 62 per cent of the fuel cost hikes, but higher surcharge rates could see regional carriers hike ticket prices by around 10 to 15 per cent.

Flying amid headwinds

But the crisis could have a silver lining for the region’s airlines and tourism industry, as the conflict forces traditional flight networks to reshuffle.

For one, key airports in the region could capture transit traffic and increased demand for direct routes, as airlines avoid traditional transit hubs in the Middle East. Patel said that these include Changi Airport in Singapore, Suvarnabhumi Airport in Bangkok and Kuala Lumpur International Airport, which have ramped up air routes to and from European cities such as London and Paris.

Hannah Pearson, director at Pear Anderson, a South-east Asia-focused tourism industry consultancy, noted: “It would be hard for local airlines to immediately flick a switch and absorb that huge capacity, but there are definitely still large areas of potential.”

Changi Airport has now seen several European airlines, including Air France, British Airways and Lufthansa, add new direct flights to the city-state amid higher passenger demand. Kuala Lumpur airport, similarly, has added a number of direct flights between the country’s capital and European cities.

Even multinational companies are increasingly steering staff itineraries through South-east Asia, as opposed to transit hubs in the Gulf, Patel noted. “The conflict is splitting the region into winners and losers,” he added.

Markets more dependent on transit travel instead of direct connections – including parts of Indonesia, Cambodia or leisure resort destinations in Thailand – could face significant visitor declines. But, strained flight connectivity between South-east Asia and Europe could also drive increased demand for travel within the region. “Domestic and intra-regional travel across South-east Asia, and between countries like China, Japan and South Korea could enjoy an uplift,” said Bowerman.

Revenue loss

While airlines have been the hardest hit by disrupted travel networks, the region’s tourism industry – including tour operators, travel agencies and accommodation providers – is also bracing for stormier weather ahead.

A report on Tuesday (Mar 24) by Pear Anderson found that 48 per cent of South-east Asian travel businesses surveyed expected gloomier prospects for the second quarter of 2026, compared with when the year began.

Land and sea travel within the region have not been spared either, slowing down both foreign and domestic tourism. Pearson told The Business Times that ferry services have also raised prices in the Philippines, Singapore and the Riau Islands in Indonesia. Meanwhile, rail ticket and petrol prices have also seen an increase.

For countries such as Thailand, where the tourism industry accounts for about 12 per cent of annual gross domestic product, the slowdown in visitors is especially concerning. The kingdom is among the nations in the region that is most dependent on tourism from Europe and the Middle East, which makes up 27 per cent of its inbound tourists.

Natthriya Thaweevong, Thailand’s permanent secretary of the Ministry of Tourism and Sports, told Bloomberg on Tuesday that a prolonged conflict lasting six months could risk the country up to three million tourists and 150 billion baht (S$5.9 billion).

OAG’s Patel noted: “Middle Eastern residents are among the world’s highest-spending tourists, frequently spending 11 times the global average when travelling in Asia.”

Maybank analyst Boonyakorn Amornsank said in a Monday report that flight services from the Gulf states to Thailand are currently operating at less than half of their pre-war capacity. “There are growing concerns whether inbound travel to Thailand will fully recover in time for the peak period, particularly from the Middle East market, between June and August,” Boonyakorn added.

The timing of the conflict has certainly not helped. Analysts noted that key public holidays in April – including Easter in the Philippines and Reunification Day in Vietnam – could strain domestic tourism if travel slows. Meanwhile, India’s school holiday period between May and June might strike a blow to South-east Asia’s travel industry, should higher airfares put tourists off from touching down in the region.

Still, the region’s tourism industry remains optimistic, with Pear Anderson finding that 64 per cent of its survey respondents believe that more global travel could be redirected to South-east Asia.

A more self-reliant regional tourism industry could be the ace up South-east Asia’s sleeve, as geopolitical and economic uncertainty persist, said Patel. He added: “Even before the conflict, South-east Asia was becoming more self-reliant on regional travel. This could insulate it from potential longer-haul market disruptions.”

Regardless, analysts remain cautious about the region’s potential to fly amid the headwinds. “A great deal depends on consumer sentiment, flight costs, and transport and travel service availability,” said Bowerman. He noted that South-east Asia’s travel woes could worsen still if the conflict prolongs, as inflationary pressures pass through to tighter consumer budgets.

“People could postpone their travel plans until later in the year,” he pointed out. “If the war continues for another week, the fuel crisis will worsen significantly. If that happens, all segments of the travel industry will need to re-forecast for 2026.”