As Middle East tensions escalate, Sri Lanka’s economic stability, remittance flows, energy security, and diplomatic neutrality face serious risk. Is the country prepared to handle the impact of a regional war involving Iran, Israel, and the US?
The Middle East sits on a powder keg one spark away from all-out war. With Iran and Israel engaging in direct hostilities, and the United States now openly involved in missile strikes, the threat of regional escalation is no longer hypothetical. For Sri Lanka, geographically distant yet economically and geopolitically intertwined, the question is urgent: Is the country ready for the fallout of a Middle East war?
1. Energy Security: Sri Lanka’s Achilles Heel
Sri Lanka imports over 80% of its petroleum from the Middle East, primarily from countries like Oman, the UAE, and Saudi Arabia. Any closure of the Strait of Hormuz a strategic chokepoint through which nearly 20% of the world’s oil passes could trigger a global fuel crisis. For a nation still struggling with forex shortages, an unstable rupee, and public trust deficits following the 2022 fuel queues, another disruption in fuel supply would be catastrophic.
Even a 10–15% spike in crude oil prices could derail the government’s fragile fiscal recovery efforts. Industries reliant on transportation and power, from agriculture to tourism, would face cost escalations, leading to inflation, reduced production, and job losses.
2. Middle East Remittances Under Threat
Nearly 1.2 million Sri Lankan migrant workers reside in Gulf countries, contributing over $5 billion in annual remittances Sri Lanka’s single largest source of foreign income. In the event of war, Gulf nations may impose curfews, repatriate foreign labor, or restrict international money transfers. A sudden drop in remittance inflows would not only worsen the dollar shortage but also deepen poverty in rural communities dependent on monthly transfers from abroad.
Previous regional conflicts, such as the 1991 Gulf War and 2003 Iraq invasion, led to significant disruptions in labor migration and repatriation of Sri Lankan workers. If history repeats, the government must be prepared to coordinate emergency evacuations and provide reintegration support to thousands of returning workers.
3. Geopolitical Balancing Act: Can Sri Lanka Stay Neutral?
Sri Lanka has traditionally maintained diplomatic neutrality in Middle Eastern affairs, balancing ties with Iran, Israel, the US, and Gulf states. However, if this conflict escalates into a wider US-Iran showdown, Colombo may be pressured to take a stance or risk alienating key partners.
For instance, the US and its allies might demand public support or alignment on UN votes, while Iran already a partner in oil deals may expect discretion or quiet diplomacy. Navigating this tightrope without damaging bilateral relationships or inviting sanctions will test Sri Lanka’s foreign policy acumen like never before.
4. Trade & Supply Chain Vulnerabilities
Many of Sri Lanka’s essential goods especially food, fertilizers, pharmaceuticals, and electronic components transit through Middle Eastern trade hubs such as Dubai, Jebel Ali, and Doha. A regional conflict could see disruptions in air and sea logistics, delayed shipments, and increased freight costs.
Sri Lanka’s port-heavy economy, reliant on re-export, transshipment, and apparel logistics, could suffer if regional freight corridors close. Additionally, tourists from the Middle East may cancel travel plans, affecting the already-fragile tourism recovery.
5. Security, Extremism, and Domestic Preparedness
A wider Middle East war could spark a resurgence in global jihadist activity, lone-wolf terrorism, or extremist propaganda networks issues Sri Lanka is already sensitive to post-2019 Easter Sunday attacks. While the military is capable, intelligence coordination, cyber surveillance, and inter-agency cooperation must be strengthened immediately.
Furthermore, misinformation and communal tensions may rise if global conflicts are manipulated by domestic actors to stoke division. In such a context, the role of media regulation, civil society monitoring, and religious harmony initiatives becomes critical.
Prepare, Don’t React
Sri Lanka may not be a combatant in the Middle East, but it is certainly in the line of economic and strategic crossfire. Fuel security, remittance flows, foreign policy neutrality, and domestic cohesion all hinge on how Colombo anticipates and prepares for external shocks.
Instead of waiting for disruption to knock on the door, Sri Lanka must begin proactive contingency planning by diversifying fuel sources, building remittance safety nets, strengthening intelligence networks, and ensuring diplomatic clarity with all stakeholders.
Failing to act now could mean the difference between resilience and another national crisis.
