📈 Middle East Conflict Triggers Global Shift in Central Bank Policy

The escalating crisis between the U.S. and Iran has created a significant supply shock, forcing central banks to balance growth support against rising inflationary pressures from fuel costs. • Regional Impact & Monetary Shifts • Emerging Asia: Central banks in India, Thailand, and the Philippines face a "risky bet" on interest rates. While India seeks to support growth, a rush to the U.S. Dollar may necessitate currency intervention. • Stagflation Risks: Oil prices surging past US$ 110 per barrel heighten the threat of stagnant growth paired with high inflation across manufacturing-heavy economies. • East Asian Hubs: Manufacturing giants like South Korea and Japan are highly vulnerable to unstable raw material costs and global trade disruptions. • Economic Outlook & Trade-offs • Japan: Estimates suggest crude oil at US$ 110 could shave 0.39% off GDP growth. With inflation exceeding 2% for four years, the Bank of Japan has limited room to pause rate hikes. • Global Markets: Safe-haven demand for the dollar is intensifying as share markets plunge, complicating the outlook for ICT/BPM and export-oriented sectors dependent on stable exchange rates. • Summary Note Policy rethink is driven by the need to counter capital outflows and rising energy prices while avoiding a total collapse in domestic growth. Based on early market reactions on March 9, 2026.