Sri Lanka is preparing for renewed economic strain as the ongoing war involving Iran continues to disrupt global markets and intensify fuel shortages, local sources and analysts say.
The conflict in the Middle East, triggered by a broader US-Israel campaign against Iran, has worsened supply disruptions that were already affecting Sri Lanka’s fragile economy, echoing the fuel shortages and inflation experienced during the country’s 2022 economic crisis.
Officials and residents report long queues at petrol stations and rising costs for essential goods, with many Sri Lankans drawing parallels to past hardships when fuel scarcity crippled daily life.
In response to mounting pressures, the Central Bank of Sri Lanka recently held its benchmark interest rate steady at 7.75 per cent, citing external uncertainties linked to the Iran war as a key risk factor to the country’s economic recovery.
Sri Lanka has also maintained a policy of neutrality amid the regional conflict, including declining ground access to two US combat aircraft earlier this month as part of its effort to avoid entanglement in the escalating crisis.
Economists warn that continued volatility in oil and fuel markets, due in part to disruptions around the Strait of Hormuz and broader geopolitical instability, could further weaken Sri Lanka’s economic outlook, potentially pushing inflation higher and slowing growth.