Higher Airfares and Fewer Visitors: How the Iran Conflict is Hitting Southeast Asia Tourism
Southeast Asia’s tourism industry is facing a double blow: still recovering from the COVID-19 pandemic, it now confronts fresh headwinds from the Iran conflict. Soaring jet fuel costs, cancelled flight routes, and weakening traveller confidence are putting millions of livelihoods at risk — right as the crucial summer season gets underway.
Southeast Asia Tourism Numbers Take a Hit
The numbers are stark. Thailand’s Ministry of Tourism and Sports recorded a 7% year-on-year drop in April visitor arrivals, with European travellers down nearly 16% and Middle Eastern visitors plummeting 57%. The picture is even grimmer in Cambodia: international and domestic arrivals to Siem Reap — home of the iconic Angkor Wat — fell 37.5% in the first four months of 2026 compared to the same period last year.
For economies where tourism is not a luxury but a lifeline, these figures carry serious consequences. Tourism accounts for roughly 13% of Thailand’s GDP and around 9% of Vietnam’s economic output. Cambodia’s hospitality and travel sector underpins millions of jobs from tuk-tuk drivers and street vendors to hotel staff and tour guides.
Why Are Airfares Rising?
The Iran conflict has triggered a sharp spike in global jet fuel prices. Airspace closures across the Persian Gulf are forcing long-haul carriers to reroute around Iranian airspace, adding hours of flight time — and thousands of dollars in fuel costs per journey.
Major airlines serving Southeast Asia have responded swiftly:
- Vietnam Airlines, AirAsia, and Cathay Pacific have cut frequencies or suspended certain routes altogether.
- Carriers have imposed fuel surcharges that in some cases have doubled compared to pre-conflict levels.
- Cathay Pacific’s chief customer and commercial officer noted that travellers are booking much closer to departure dates — a clear sign of widespread uncertainty.
For budget-conscious travellers, who make up a significant share of Southeast Asia’s tourist base, these fare increases can be the difference between booking a trip and staying home.
The Ripple Effect on Local Economies
Higher airfares don’t just affect airlines — they compress spending across the entire travel supply chain. The United Nations Development Programme has explicitly warned that reduced travel confidence and elevated ticket prices will rapidly feed through to household incomes and government tax revenues across tourism-dependent nations.
Industry analysts observe a predictable domino effect:
- Luxury travellers downgrade to mid-range properties.
- Mid-range travellers shift to budget guesthouses.
- Budget travellers postpone or cancel trips entirely.
On the ground, ride-hailing and taxi drivers are already feeling the squeeze as fuel costs eat into their margins — even before any decline in tourist numbers reduces the pool of potential fares.
How Long Will the Impact Last?
The critical unknown is duration. Travel experts stress that short disruptions can be absorbed; it is a prolonged conflict — one that keeps airfares elevated and keeps nervous travellers at home — that poses an existential threat to the region’s smallest tourism operators.
Southeast Asia has proven resilient before. The region rebounded from the 2003 SARS epidemic, the 2004 Indian Ocean tsunami, and ultimately from COVID-19. But industry leaders warn that the combination of a pandemic recovery still incomplete and a new geopolitical shock is unprecedented in modern tourism history.
What Travellers Should Know
If you are planning a trip to Southeast Asia in the coming months, here is what to keep in mind:
- Book flexible fares where possible — conditions are changing rapidly.
- Compare routing options: some carriers avoid the Gulf entirely and may offer more stable pricing.
- Travel insurance covering trip disruption has never been more important.
- Consider shoulder-season travel to avoid peak-season price pressure on top of conflict-driven surcharges.
Despite the disruption, destinations like Thailand, Vietnam, Bali, and Cambodia remain among the world’s most rewarding travel experiences — and local communities genuinely depend on visitor support now more than ever.
Source: Euronews — Saskia O’Donoghue, June 1, 2026