Even before the latest hostilities, analysts described Iran’s economy as deeply fragile, weighed down by sanctions, energy imbalances, inflation and declining exports. The impact of renewed strikes and the effective closure of Hormuz a critical artery for global energy shipments has sharply intensified those pressures.

The blockade threatens more than 90% of Iran’s annual trade, estimated at over $100 billion, according to analysts, cutting off vital oil exports that account for roughly 80% of government revenue. Estimates cited by experts suggest losses of around $435 million per day, potentially exceeding $13 billion monthly.

Energy infrastructure constraints are compounding the crisis. With limited storage capacity and continued production, Iran risks being forced to halt oil output within weeks, raising the possibility of long-term damage to oil fields and a permanent reduction in production capacity.

On the domestic front, economic indicators point to severe distress. The Iranian rial has sharply depreciated, while food inflation has surged into triple digits, eroding purchasing power and fueling social discontent.

Shortages of energy have also disrupted key industries such as steel, cement and petrochemicals.The blockade’s effects are further magnified by limited alternative trade routes. Infrastructure outside the Gulf, including overland corridors and non-Hormuz ports, can handle only a fraction of normal throughput, leaving Iran with few options to offset lost maritime access.

Internal divisions are also emerging over the management of foreign currency revenues and economic policy, with some officials warning that significant portions of export earnings are not reaching state coffers.

Former Iranian foreign minister Mohammad Javad Zarif has called for compromise, urging Tehran to consider limiting its nuclear program and reopening Hormuz in exchange for sanctions relief to prevent further economic deterioration.Analysts say the government’s response is driven less by economic logic than by strategic considerations.

Sanam Vakil of Chatham House said the conflict is viewed by Iran’s leadership as existential, limiting the likelihood of policy shifts despite economic strain.The longer-term outlook remains uncertain.

Researchers at Royal United Services Institute warn that postwar recovery could be hampered by damaged infrastructure, reduced access to regional financial networks and strained ties with Gulf partners, particularly the United Arab Emirates, a key trade hub for Iran.

With reconstruction costs expected to be substantial and trade channels constrained, the economic consequences of the conflict may prove more enduring than the military phase itself.

Marcos told reporters he had consulted counterparts across the 10-member bloc on whether to postpone the gathering, but leaders agreed that coordination was more critical given the external shocks affecting fuel supply chains, food prices and migrant workers.

“The consensus that we came to is that it is precisely now that we must coordinate our efforts,” Marcos said.

The streamlined agenda will concentrate on immediate economic pressures facing Southeast Asia, including volatility in energy markets and rising food costs, which governments in the region are monitoring closely as geopolitical tensions persist.

ASEAN economies are particularly sensitive to fluctuations in global fuel prices due to their reliance on imports, while supply chain disruptions have added strain to domestic inflation dynamics in several member states.

Marcos said discussions would also address the welfare of migrant workers, a key issue for ASEAN countries that rely heavily on overseas employment. Regional governments have been assessing the impact of instability in the Middle East, a major destination for Southeast Asian labour.

The Philippine government has already flagged concerns about overseas workers in affected areas, reflecting broader anxieties across ASEAN about potential displacement and income disruptions.

The decision to proceed with the summit underscores ASEAN’s preference for continuity in regional dialogue despite global uncertainty. Marcos indicated that postponement was considered but ultimately rejected in favour of maintaining diplomatic engagement.

The summit is expected to retain core leadership interactions while scaling back ceremonial and extended policy sessions, reflecting what Marcos described as a need for efficiency under current conditions.

The statement, issued by Iran’s foreign ministry and shared with IMO member states and non-governmental organizations, said vessels that do not “participate in or support acts of aggression” against Iran would be permitted safe passage through the strategic waterway, subject to adherence to safety and security regulations.

However, it specified that vessels, equipment, and assets belonging to what it described as “aggressor parties” including the United States and Israel would not qualify for what it termed “innocent or non-hostile passage.

”Iran said responsibility for any disruption or escalation in the Strait of Hormuz lay with Washington and Tel Aviv, accusing them of waging an “unlawful and destabilising war” that has heightened risks to international shipping and regional stability.

The statement reflects Tehran’s position as tensions remain elevated following the outbreak of war triggered by U.S.-Israeli strikes on Iran on February 28.

The Strait of Hormuz, one of the world’s most critical maritime chokepoints, has been effectively closed since the escalation, contributing to sharp increases in global oil and gas prices.

Iran’s conditional reopening for select vessels introduces limited operational clarity for commercial shipping, though the exclusion of U.S. and Israeli-linked assets underscores the continuing strategic and geopolitical risks in the region.

The shift marks a departure from earlier market resilience, with traders now pricing in longer-term disruptions to energy supply chains and global trade flows. Analysts said the reassessment reflects growing concern that the conflict could inflict sustained economic damage rather than remain a short-lived shock.

Global equities extended losses, with the S&P 500 falling 1.5% on Friday as major technology firms led declines, while futures dropped a further 0.6% in Asian trading. Japan’s Nikkei 225 slid 3.5%, and China’s CSI 300 Index was on track for its steepest losses since tariff-driven market turmoil last year.

MSCI’s global equities gauge, the MSCI World Index, hit a four-month low on Monday after breaking below its 200-day moving average, a key technical level closely watched by investors.

Market participants said the selloff reflected waning confidence in valuations following a rally that had been underpinned by expectations of limited geopolitical fallout.

Investors are increasing cash holdings and reducing leveraged positions across major markets, according to fund managers. The reallocation reflects a broader move to hedge against prolonged instability, with energy stocks emerging as relative beneficiaries amid expectations of tighter supply.

Aaron Costello, head of Asia at Cambridge Associates, said markets had previously been conditioned to expect rapid reversals in geopolitical tensions but were now adjusting to the likelihood of escalation. Speaking at a Milken Institute event in Hong Kong, he said investors were beginning to factor in the depletion of reserves and stockpiles if the conflict persists.

Karen Jorritsma, head of Australian equities at RBC Capital Markets, said the speed of the selloff pointed to weak conviction behind earlier gains, with investors exiting positions quickly as risks mount.

Damage to critical energy infrastructure and supply routes is reinforcing expectations of lasting economic impact. Investors are closely monitoring developments around the Strait of Hormuz, a key artery for global oil shipments, as tensions raise the risk of prolonged supply constraints.

Recent disruptions have already affected liquefied natural gas flows, with nearly a fifth of Qatar’s export capacity reportedly knocked out by Iranian attacks, according to statements cited by Reuters last week. Market participants said such disruptions could have multi-year implications for contracts and pricing if sustained.

The prospect of continued supply shocks has led investors to reassess the effectiveness of potential policy responses, including interest rate cuts or diplomatic shifts, in offsetting the broader economic fallout.