The ongoing conflict in Iran has cast a long shadow over South Asia, prompting a complex and often delicate diplomatic balancing act across the region. Most nations have adopted a cautious approach, with varying degrees of neutrality and carefully calibrated responses to the escalating tensions.
Navigating the Diplomatic Tightrope
The war has presented a significant foreign policy challenge for South Asian countries, forcing them to weigh their relationships with major global powers against their regional interests and domestic considerations.
- India’s Stance: India, a key player in the region, condemned Iran’s attack on Gulf allies but refrained from explicitly condemning the US-Israel strikes on Iran. This nuanced position was evident when India signed a condolence book for the late Iranian Supreme Leader, Ayatollah Syed Ali Khamenei, signaling a respect for diplomatic protocol while maintaining its strategic alignment.
- Bangladesh’s Call for Restraint: Bangladesh echoed the call for de-escalation and dialogue. It condemned Iran’s actions against Gulf nations while also expressing sorrow over Ayatollah Khamenei’s assassination, offering condolences to the Iranian people.
- Pakistan’s Condemnation and Offer of Mediation: Pakistan, which experienced significant violence following Khamenei’s death, strongly condemned the US-Israel attacks on Iran, labeling the assassination a grave violation of international law. Given its bordering status with Iran and defence cooperation with Saudi Arabia, Pakistan has positioned itself as a potential mediator.
- Sri Lanka’s Neutrality: Sri Lanka, like many of its neighbours, has navigated the diplomatic complexities with a careful balancing act.
- The Maldives’ Unique Position: In contrast to the regional trend, the Maldives stands out as the sole South Asian nation to sever ties with Israel in the wake of the attacks on Iran. The island nation has denounced aggression from all sides and urged for an immediate de-escalation of tensions.
Economic Ramifications: Energy, Remittances, and GDP
The economic implications of the conflict are profound for South Asian nations, heavily influencing their policy decisions. Key concerns revolve around energy security, the vital flow of remittances, and the overall health of their Gross Domestic Product (GDP).
- Energy Dependence: Many South Asian countries rely heavily on energy imports, particularly from the Gulf region.
- Indian Prime Minister Modi highlighted concerns about disruptions to international shipping lanes in the Strait of Hormuz, which directly impacts India’s energy imports. The government has assured citizens of continued supplies of cooking gas and fertilizers, noting a diversification of import sources over the past decade.
- Bangladesh, importing approximately 95 percent of its energy, is significantly dependent on LNG from the Gulf. The nation implemented school closures and fuel rationing measures as 65 percent of its electricity generation hinges on imported fuel. India has committed to supplying additional diesel to Bangladesh.
- Sri Lanka, still recovering from an economic crisis, has introduced a four-day work week, implemented fuel rationing via QR codes, and increased petrol prices. The country is seeking an uninterrupted supply of petroleum products from India.
- The Maldives faces substantial costs for diesel imports, essential for electricity generation. Spiraling oil prices have strained its foreign currency reserves, impacting its debt-servicing capacity. India has been approached for petroleum product supplies.
- Nepal has seen a hike in petrol prices and is considering additional supplies from its southern neighbour, India. Nepal has also requested an increased monthly allocation of LPG.
- Pakistan has implemented the steepest petrol price increase among South Asian nations.
- Remittances as a Lifeline: Remittances from expatriates working in the Gulf countries form a crucial component of the GDP for many South Asian economies.
- India received an estimated $40 billion in remittances from the Gulf last year.
- For Bangladesh, the Gulf region contributed $15 billion in remittances during the 2025-26 financial year, representing a significant portion of its total remittances.
- Pakistan received $26.5 billion from these countries.
- Remittances from the Gulf account for approximately 10 percent of Nepal’s GDP.
- The Maldives and Sri Lanka also depend heavily on their citizens working in Gulf nations.
The war has not only disrupted travel and trade but has also tragically led to the loss of lives among South Asian migrant workers.
Geopolitical Fallout and the Role of Multilateralism
The conflict has also underscored the evolving geopolitical landscape and raised questions about the efficacy of international institutions.
- Regional Connectivity and Peace Initiatives: India, which has fostered connectivity with Central Asia through Iran, has advocated for peace and dialogue. Pakistan’s offer to mediate highlights its strategic positioning.
- The Near Miss: The torpedo attack on an Iranian Navy vessel, IRIS Dena, as it departed Indian waters on March 4, killing 130 sailors, served as a stark reminder of how close the conflict had come to wider escalation. India clarified its role, stating it had offered docking facilities, while Sri Lanka reported rescuing sailors. Both nations subsequently allowed other Iranian vessels to dock, underscoring regional engagement with Iran.
- Multilateralism Under Strain: The incident has cast a spotlight on the diminished influence of multilateral organizations like the United Nations. While the UN condemned Iran’s attacks, its silence on the US-Israel strikes has been noted. At a UN Human Rights Council meeting, Gulf countries voiced concerns about Iran posing an existential threat.
- Self-Reliance in Security: The conflict underscores the principle that in times of crisis, nations must primarily rely on their own security capabilities, as broader alliances may not always materialize. The economic stakes are immense, with fears of prolonged conflict exacerbating inflation and further damaging already fragile economies across South Asia.
