Soaring prices and complications from the war with Iran are threatening the summer travel season in tourism-dependent Southeast Asian countries like Thailand and Vietnam, which are still recovering from the COVID-19 pandemic. Elevated jet fuel costs and ceasefire uncertainties have led to flight cancellations and higher ticket prices, straining economies that rely heavily on tourism revenue.
Impact on Travel and Local Economies
Tourism contributes nearly 13% of Thailand's GDP and about 9% of Vietnam's, and supports millions of jobs in Cambodia. The war has driven up oil prices, increasing fuel import costs for these economies. Families are cutting back on travel as gas and grocery prices rise globally. In Siem Reap, Cambodia, tuk-tuk driver Siv Pech reported his daily earnings dropping from $20 to about $5, with half going to gas and the rest to food.
Airline Disruptions and Fare Hikes
Jet fuel shortages and surging costs have forced airlines like Vietnam Airlines, AirAsia, and Cathay Pacific to cut flights or adjust schedules. Airspace closures over the Persian Gulf have forced longer routes, and airfares have jumped sharply. Cathay Pacific's fuel surcharge for medium-haul flights rose from 264 to 633 Hong Kong dollars, and for long-haul from 569 to 1,362 Hong Kong dollars. Travelers are booking closer to departure dates, indicating growing uncertainty.
Economic Consequences
Moody's Analytics estimates the war could reduce Asia-Pacific economic growth by 0.1 to 0.4 percentage points in 2026. Higher production costs and consumer prices, along with weaker tourism demand, are key factors. The United Nations Development Program warns that higher airfares and weaker travel confidence can quickly affect household incomes and public revenues in tourism-dependent economies.
In Thailand, visitor numbers fell 7% year-on-year in April, with European arrivals down nearly 16% and Middle Eastern arrivals sinking 57%. In Cambodia, international and domestic visitors to Siem Reap dropped by 37.5% in the first four months of 2026 compared to the same period last year. Restaurant owner Sokha Sambo in Siem Reap struggles with rising liquefied petroleum gas costs, making it harder to cover employee salaries.
Travel is often the first expense cut during economic downturns, warns Le Tuyet Lan, who runs bed-and-breakfast properties in Vietnam. Luxury travelers shift to midrange options, midrange to budget, and the cheapest tier becomes most vulnerable. This disruption threatens the entire industry, which is still reeling from the pandemic's impact.
