Arutha Research Warns of Middle East Conflict Risks to Sri Lanka 📈

A new analysis by Arutha Research highlights significant vulnerabilities for Sri Lanka’s economy as Middle East tensions disrupt trade routes and energy markets. The impact ranges from potential fuel shortages to inflationary pressure on food and services. • Energy & Power Security: The UAE supplies 38% of Sri Lanka’s oil; CPC reports only one month of fuel stocks currently available. LPG (Gas) is heavily dependent on the Gulf, with Oman (53%), UAE (17%), and Saudi Arabia (11%) being primary sources. Thermal oil accounted for 20% of electricity generation in Feb 2026; disruptions could strain the power grid. • Trade & Export Impact: Tea is highly exposed, with 25% of exports ($ 450 million) destined for the conflict-affected region. Total merchandise exports to the Middle East reached $ 852 million (7% of national total). • Foreign Remittances: Migrant workers in Kuwait, Saudi Arabia, UAE, and Qatar provide 38% of Sri Lanka’s total remittance inflows. Escalation may trigger safety concerns and repatriation needs. • Agriculture & Food: Approximately 22% of fertiliser imports originate from the Middle East, risking higher production costs for local farmers. • Macro-Economic Outlook: Supply chain disruptions through the Strait of Hormuz are driving oil prices higher, threatening to reverse Sri Lanka's low inflation (currently under 2%). Tourism faces risks from airspace restrictions and rerouted long-haul flights from Europe. _Note: Analysis based on Arutha Research report dated March 2026._