Kathmandu – The escalating war between Iran and Israel — with the United States reportedly involved — is raising serious concerns for Nepal’s fragile, import-dependent economy. Although Nepal has minimal direct trade with Iran, its heavy reliance on remittances from Gulf nations and fuel imports via India places it in a vulnerable position.

Remittance Flow at Risk

Remittances account for approximately 25–30 percent of Nepal’s Gross Domestic Product (GDP). Nearly 1.5 million Nepalis are employed in Gulf countries, including Qatar, Saudi Arabia, United Arab Emirates, and Kuwait.

According to Nepal’s Ministry of Foreign Affairs, more than 1.7 million Nepali migrant workers are currently in ten Gulf nations. The UAE alone hosts around 700,000 Nepali workers. Saudi Arabia employs 384,865 Nepalis, Qatar 357,913, Kuwait 175,000, Oman 25,000, Bahrain 28,000, Iraq 30,000, Cyprus 17,000, Israel 6,500, and Iran six workers.

With the conflict reportedly spreading tensions across the Middle East, experts warn of a possible disruption in the monthly remittance inflow of over NPR 200 billion (approximately USD 1.5 billion). Former Commerce Ministry official and trade expert Rabi Shankar Sainju cautioned that a prolonged war could force Nepal to repatriate thousands of workers, increasing domestic unemployment and creating social and economic pressure.

Fuel Prices and Trade Deficit Under Strain

Petroleum products are the largest contributor to Nepal’s trade deficit. If global crude oil prices exceed USD 120 per barrel, Nepal’s import bill could double, according to experts.

Nepal purchases all of its fuel from Indian Oil Corporation through India. Any disruption or price hike in India’s supply chain would immediately impact fuel prices at Nepali petrol stations.

Long queues have already been reported at several fuel stations in Kathmandu, with some pumps displaying “Out of Stock” notices. However, the Nepal Oil Corporation (NOC) has stated that there is currently no immediate disruption in supply or pricing due to Middle East tensions.

According to NOC spokesperson Manoj Kumar Thakur, Nepal has a storage capacity of 102,000 kiloliters of petroleum products — sufficient to meet national demand for about 13 days. At present, around 80 percent of that capacity is filled, which can sustain demand for approximately 10 days.

Meanwhile, global oil markets have already reacted sharply. Brent crude and NYMEX light sweet crude both surged by more than 10 percent during early Asian trading on Monday. Brent crude was trading around USD 79.30 per barrel in early hours before slightly easing later, while NYMEX hovered around USD 72.70 per barrel.

Rising Transport Costs and Inflation Threat

As a landlocked, import-based economy, Nepal is highly vulnerable to rising fuel costs. Increased oil prices raise transportation expenses, which directly affect food supplies transported from the southern plains to Kathmandu and other cities.

Experts warn of “imported inflation,” with the national inflation rate potentially rising above double digits (over 10 percent). Higher fuel prices would also increase trucking and logistics costs, further widening the trade deficit.

Nepal’s exports — particularly carpets and handicrafts destined for the U.S. and Europe — often pass through the Red Sea shipping route. If maritime security deteriorates, vessels may need to reroute, potentially increasing shipping costs by 30–40 percent.

Foreign Exchange Reserves: Temporary Cushion

As of early 2026, Nepal holds approximately USD 22 billion in foreign exchange reserves — enough to cover around 18 months of imports. However, economists warn that if remittance inflows decline and oil prices remain elevated, reserves could deplete rapidly.

Should the war continue for more than a year, analysts caution that Nepal could face a currency crisis similar to that experienced by Sri Lanka in recent years.

Edible Oil and Export Sector at Risk

Soybean and palm oil products account for nearly 40 percent of Nepal’s total exports. Raw materials are imported from Argentina and Brazil, processed domestically, and re-exported mainly to India. Any disruption in shipping routes could delay raw material imports, severely impacting Nepal’s edible oil industry.

Additionally, exports of tea, cardamom, pashmina, carpets, and ready-made garments could suffer from reduced global demand and higher transportation costs.

Gold and Silver Prices Likely to Surge

Geopolitical instability in the Middle East traditionally pushes investors toward safe-haven assets. Analysts expect gold and silver prices to rise if the conflict escalates further.

Historically, gold has served as a hedge during global crises. With the United States directly involved in the conflict, potential pressure on the U.S. dollar could further boost gold demand. Silver may also benefit from both investment demand and industrial use, particularly in electronics and solar energy sectors.

While precious metals may offer attractive returns for investors, experts caution that price volatility is likely to remain high in the coming months.

Overall, while Nepal is not directly involved in the Iran–Israel conflict, its economic dependence on remittances, imported fuel, and global trade routes leaves it highly exposed. A prolonged war could trigger serious macroeconomic stress, testing the resilience of Nepal’s economy in 2026 and beyond.