### 📈 Regional Instability Clouds SL’s Economic Recovery

Escalating Gulf conflict and Iranian strikes on civilian infrastructure are posing significant "system shocks" to Sri Lanka’s fragile economic recovery. With over one million citizens employed in the region, the impact spans from labor safety to critical foreign exchange inflows. • Impact on Migrant Workers As of March 2026, nearly 1,007,855 Sri Lankans are employed in the Middle East, with major clusters in the UAE (350,000), Saudi Arabia (246,139), and Kuwait (175,000). While no large-scale evacuations are yet reported, HRW confirms 11 civilian deaths and 268 injuries in the region, with migrant workers forming the majority of victims. • Sectoral Disruptions Tea: The Middle East absorbs approximately 52% of Ceylon Tea exports. Supply chains are currently at a standstill due to shipping suspensions, with industry losses estimated at US$ 10–15 million per week. Remittances: Accounts for ~45% of total inflows (US$ 8.07 Bn in 2025). A prolonged conflict threatens this vital FX buffer, which is essential for debt servicing and essential imports. Tourism: Major hubs like Dubai and Doha handle ~30% of transit tourists to SL. Airspace closures have led to massive cancellations during the peak March season. • Energy & Inflation Global crude oil has surged toward US$ 90–100/barrel. Since the UAE supplies 38% of SL’s petroleum, a sustained spike could trigger a LKR 40/L hike in domestic fuel prices by April 1, reversing recent low inflation trends (1.6%). • Logistics Opportunity In contrast, the Port of Colombo is seeing increased vessel traffic as shipping lines reroute away from the Red Sea, potentially benefiting major conglomerates in the maritime & logistics sector.