When Two Giants Fight: How the Iran-America Conflict Threatens — and Is Now Beginning to Change — Asia Pacific's Economic Stability

By: Sondang Tampubolon | SocDem Asia Pacific June 17, 2026

Introduction

There is an enduring principle in geopolitics: when elephants fight, it is the grass beneath them that gets trampled. For months, that "grass" has been the Asia Pacific — a region of 4.5 billion people, the engine of global economic growth, yet bearing the consequences of a conflict between two great powers on the other side of the world.

But in the last 48 hours, something significant has happened.

On June 14, 2026, the United States and Iran announced a Memorandum of Understanding (MoU) — known as the Islamabad Memorandum — encompassing a ceasefire, the reopening of the Strait of Hormuz, and a 60-day window for follow-on negotiations. Facilitated by Pakistan, Qatar, Saudi Arabia, and Turkey, this agreement represents the most significant diplomatic breakthrough in the Iran-America conflict in over a decade.

Yet this must be understood clearly: this is not the end of the story. It is a new chapter, full of uncertainty — and Asia Pacific must be ready.

Chronology: From JCPOA to War, Then to the Negotiating Table

To understand the weight of this agreement, we must understand the long road that led here.

In 2015, the world witnessed a rare diplomatic achievement: the Joint Comprehensive Plan of Action (JCPOA) — a nuclear agreement between Iran and six world powers built on mutual commitment and verified compliance. It was proof that diplomacy, when pursued in good faith, can work.

In 2018, that proof was discarded. President Trump unilaterally withdrew the US from the JCPOA and reimposed maximum sanctions on Iran — a decision that destabilized not only the Middle East, but sent shockwaves across the entire global economy. Renegotiation efforts under the Biden administration never reached a final agreement.

Then in February 2026, US and Israeli airstrikes on Iranian nuclear and military infrastructure began — destroying whatever remained of diplomatic trust and triggering open hostilities. The JCPOA formally expired. Sanctions were fully restored. Iran's uranium enrichment had far exceeded agreed limits. Open war followed. The US imposed a naval blockade on Iranian ports. The Strait of Hormuz was disrupted. Oil prices surged. Asia Pacific bore a burden it did not create.

The Islamabad Memorandum: What Has Been Agreed, What Has Not

Here is an accurate picture of what has — and has not — been agreed:

What has been agreed:

• Permanent and comprehensive ceasefire — an immediate and permanent halt to military operations

• Reopening of the Strait of Hormuz — the US will lift its naval blockade of Iranian ports; Iran will remove restrictions on shipping

• 60-day MoU framework — a negotiating window to resolve more complex outstanding issues

• Iran's political commitment not to pursue nuclear weapons

What remains under negotiation:

• Technical details regarding Iran's highly enriched uranium stockpile

• A full sanctions-lifting schedule

• The complete unfreezing of Iranian assets

• Iran's proxy role across the Middle East

• Sanctions relief and the full lifting schedule — deferred to follow-on talks

In other words: this is a promising beginning, not a finish line. 

Fundamental nuclear questions remain unresolved. The road from framework to full implementation is always longer and more winding than anticipated.

The Strait of Hormuz: From Threat to Hope

The Strait of Hormuz is not merely a waterway. It is the economic lifeline of Asia Pacific.

Every day, approximately 20% of the world's oil supply passes through this 54-kilometer strait. More critically, over 80% of that volume is destined for Asian markets, and 90% of LNG transiting the strait is bound for Asia. These are not abstract statistics — they represent the energy that powers factories, hospitals, schools, and homes across our region.

For months, disruption to this strait translated directly into rising prices, shrinking fiscal space, and growing hardship for ordinary people across Asia Pacific. The commitment to reopen it is therefore not merely a geopolitical development — it is a matter of social justice for millions of people who had no voice in the conflict that caused their suffering.

Specific Impacts on Asia Pacific Nations

🇮🇩 Indonesia

Indonesia is a net importer of crude oil and petroleum products — and this crisis exposed just how deep that vulnerability runs. Energy subsidies in the national budget had already reached historic levels, squeezing fiscal space for education, healthcare, and infrastructure. The surge in oil and gas imports during the crisis pushed Indonesia's trade surplus to its weakest point since the depths of the COVID-19 pandemic.

With the Islamabad Memorandum, there is genuine hope: lower oil prices mean reduced subsidy pressure, room for the Rupiah to strengthen, and a narrowing of the current account deficit. However, Indonesia must not grow complacent — structural dependence on energy imports is a long-term problem that no single geopolitical agreement can resolve.

🇳🇵 Nepal

Nepal is a full net energy importer — but what makes Nepal's vulnerability unique is its profound dependence on remittances from the Persian Gulf region. Remittances account for approximately 26–27% of Nepal's GDP, with nearly three-quarters of Nepali migrant workers employed in the Gulf and Middle East.

The Iran-America conflict created a double crisis for Nepal: fuel prices rising at home while remittance income was simultaneously threatened by instability in Gulf economies. The reopening of the Strait of Hormuz and normalization of the Persian Gulf economy directly protects the livelihoods of millions of Nepali families — this is a concrete, human-level positive impact of the Islamabad Memorandum.

🇲🇲 Myanmar

Myanmar faces what can only be described as a crisis upon a crisis. Gripped by internal conflict since the 2021 military coup, with a fragmented economy and depleted foreign exchange reserves, the global energy shock added a burden that is nearly unbearable. The vast majority of Myanmar's fuel needs are imported, meaning every spike in global oil prices directly drains the country's already-scarce resources.

The Islamabad Memorandum brings hope of lower fuel prices — but for Myanmar, the challenge is not only price, but the capacity to pay for imports at all. As long as the internal conflict remains unresolved, the benefits of Iran-America normalization will be difficult for ordinary Myanmar citizens to feel.

From a social-democratic perspective, the international community must not use the Islamabad Memorandum as a reason to reduce attention to the humanitarian crisis in Myanmar. Economic normalization at the global level must be accompanied by sustained pressure for political resolution and civilian protection.

🇵🇭 Philippines

The Philippines is among the most exposed countries in Asia Pacific to global oil price shocks — and among the fastest to benefit from normalization. Nearly all of the Philippines' crude oil, liquid petroleum products, and LPG originate from the Middle East. Crude oil is among the country's largest import items.

Equally important is the fate of Overseas Filipino Workers (OFWs) in the Persian Gulf. Normalization of Iran-America relations and stabilization of the Gulf region directly protects the jobs of millions of OFWs — whose remittances are the backbone of Philippine domestic consumption and a pillar of the national economy.

A Social-Democratic Perspective: Lessons from This Crisis

The Islamabad Memorandum is good news. But it is also a mirror that reveals just how vulnerable Asia Pacific has been all along.

Three lessons must not be forgotten:

First: Multilateralism is the only path forward. This crisis was born from unilateral action — the US withdrawal from the JCPOA in 2018. Its resolution required multilateral mediation across five countries. This is no coincidence. It is confirmation that no single power can resolve global conflicts alone. Asia Pacific must continue to champion multilateral frameworks as the norm, not the exception.

Second: Energy diversification is a national security agenda that cannot be deferred. For months, Indonesia, Nepal, Myanmar, and the Philippines were held hostage by decisions made in Washington and Tehran. The renewable energy transition is not merely an environmental agenda — it is a strategy for economic sovereignty. Every megawatt of clean energy built domestically is one step away from dependence on an unstable region.

Third: Regional solidarity must be built before the next crisis arrives. The Islamabad Memorandum may resolve this crisis. But the next one — elsewhere, with different actors — will inevitably come. ASEAN and Asia Pacific forums must build shared response mechanisms: joint strategic oil reserves, fiscal policy coordination, and collective energy diplomacy.

Conclusion: Between Relief and Vigilance

The Islamabad Memorandum is a genuine step forward. The immediate fall in oil prices of more than 4% in a single day signals that markets believe in the direction being taken. For Indonesia, Nepal, Myanmar, and the Philippines — this is a breath of relief that was desperately needed.

But this relief must be accompanied by vigilance. This agreement remains a framework MoU — not a final peace treaty. The most sensitive nuclear issues are unresolved. History teaches us that the road from framework to full implementation is always longer and more winding than anticipated.

What is certain: Asia Pacific cannot wait for others to resolve their conflicts before building its own resilience. Because in the end, when two giants fight, only we ourselves can ensure that we are not merely the grass that gets trampled — but a region standing on a foundation of energy security, diplomacy, and solidarity that we have built ourselves.

Sondang is a politician and Privat Practitioner (Lawyer) actively engaged in issues of geopolitics, law, education, and youth empowerment. This article was written for SocDem Asia Pacific.

Primary Sources Cited in This Article:Axios | PBS NewsHour | Le Monde | Atlantic Council | The Conversation | Statistics Indonesia (BPS) | World Bank | ISP Myanmar | ReliefWeb | Fulcrum ISEAS | Philippine Information Agency | Zero Carbon Analytics | ORF Middle East | APERC | OEC World