The Conflict that Inflicts – By Dr Harold Gunatillake
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The conflict initiated by the United States in conjunction with Israel against Iran is anticipated to conclude within a few weeks, according to President Trump. However, it seems that hostilities will persist until the United States withdraws its military presence from the Arabian Economic Union (AEU), Dubai, Qatar, and other locations, pursuant to directives issued by the newly elected President of Iran.
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Meanwhile, the United States has targeted more than ninety Iranian military installations on Kharg Island, including naval mine storage facilities, missile storage bunkers, and various other military sites, while deliberately avoiding attacks on oil infrastructure.
The strikes constitute a component of a broader initiative aimed at undermining Iran’s military capabilities, with the United States and Israel focusing their efforts on defence industrial sites, air defence systems, and missile production facilities throughout Iran.
The destruction caused by the US missiles includes Military infrastructure, Civilian impact and economic disruption.
Kharg Island handles approximately 90 per cent of the nation’s oil shipments.
U.S. President Donald Trump has announced the strikes, asserting that they were “one of the most powerful bombing raids in the history of the Middle East,” and warned that oil infrastructure on the island could be
targeted next if Iran disrupts shipping in the Strait of Hormuz.
Iran has formally pledged to retaliate, with its armed forces warning that any attack on the nation’s oil and energy infrastructure would result in strikes against facilities owned by oil companies collaborating with the United States.
The strikes have generated apprehension about international oil reserves and pricing, as Brent crude futures have risen above $100 per barrel.
As of March 15, 2026, Brent crude oil prices are notably above
$100 per barrel, with recent futures trading within the range of approximately $103.14 to $103.89. The rise in prices has been attributed to geopolitical tensions, notably the closure of the Strait of Hormuz, which has kept the 52-week range high, from $58.40 to $119.50.
The conflict has disrupted oil supplies, as Iran has blocked the Strait of Hormuz, a crucial trade route, thereby affecting approximately 20% of global oil shipments.
The increase in oil prices has prompted global economic concerns: elevated oil prices could lead to higher inflation, thereby affecting consumer spending and economic growth.
The International Energy Agency (IEA) and G7 nations are considering measures to stabilise the market, including the strategic release of petroleum reserves.
Sri Lanka’s situation
Sri Lanka, as an import-dependent economy, is likely to experience substantial impacts from the US-Iran conflict, particularly rising energy costs and inflationary pressures. The nation’s economy is susceptible to global economic shocks, and ongoing tensions have led to higher freight charges, insurance premiums, and landed costs for imports.
The government of Sri Lanka is implementing proactive measures to mitigate the economic repercussions of the US-Iran conflict.
President Anura Kumara Dissanayake has directed officials to prioritise strategies to control inflation whilst minimising adverse impacts on economic stability and livelihoods.
Regarding fuel and energy management, adequate stockpiles are maintained, and alternative measures to regulate fuel shipments and domestic prices are under consideration.
Regarding tourism and trade, discussions are underway to mitigate potential impacts, including the exploration of alternative air traffic routes.
Nevertheless, certain economists propose that the conflict might generate opportunities for Sri Lanka, such as:
As shipping traffic increases owing to vessels rerouting to avoid the conflict zone, Sri Lanka’s ports are expected to experience heightened activity, thereby improving the country’s logistics sector.
Furthermore, enterprises with excess petroleum and gas inventories, such as Lanka IOC PLC and Ceylon Petroleum Corporation, are anticipated to benefit from the current situation. As international oil prices rise due to the conflict, these organisations have the opportunity to sell their stockpiled fuel at higher prices, thereby increasing their revenue.
In Sri Lanka, the Ceylon Petroleum Corporation has assured the public that the country has sufficient fuel supplies for the next two months, and that imports are sourced from countries not directly involved in the conflict, such as Malaysia, Singapore, and India.
Key Impacts
An increase in energy costs, exemplified by Sri Lanka’s import bill, is anticipated. This situation is likely to put pressure on the rupee and lead to higher inflation.
The conflict could affect the export industry, particularly in the tea and apparel sectors, due to higher freight costs and supply chain disruptions.
Instability in the Middle East may affect remittances, which constitute a vital source of foreign exchange for Sri Lanka.
Globally, the conflict has raised concerns regarding energy security, as demonstrated by the nearly doubling of natural gas prices in Europe. The International Energy Agency has issued warnings about potential disruptions to global oil supplies, which could lead to higher prices and economic instability.
The Sri Lankan government has outlined a comprehensive plan to promote economic reforms and achieve the objectives set by the International Monetary Fund (IMF), with a particular emphasis on fiscal discipline, revenue enhancement, and investment attraction.
About investment projects, including the attraction of foreign investment, particularly in the Colombo Port City, and the implementation of structural reforms aimed at liberalising trade and investments,
IMF has approved a disbursement of $206 miliion in emergency financial support and is expected to approve the next tranche of
$347 million upon completion of the Fifth Review.
The summary of the situation in Sri Lanka indicates a challenging scenario. The economic state remains fragile, as the nation continues to recover from a significant financial crisis in 2022.
Additionally, the ongoing conflict in the Middle East has heightened uncertainty, with rising oil prices and disrupted trade routes posing risks to the nation’s progress.
With proactive measures, IMF support, and a focus on fiscal discipline, there is a sense of cautious optimism. As reforms are implemented, Sri Lanka is positioned to emerge more resilient, with potential growth prospects on the horizon.
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