Business

War in Middle East sends shockwaves through Sri Lanka’s export sector

Published

2 weeks ago

2026/03/4

Indhra Kaushal Rajapaksa

Sri Lanka’s export sector is bracing for fresh turbulence as the escalating conflict involving Iran and parts of the Middle East begins to send shockwaves through global trade, shipping and energy markets.

Though geographically distant from the conflict zone, Sri Lanka’s exporters are far from insulated. Industry leaders warn that higher freight costs, rising oil prices and increased trade risks could erode margins and disrupt key markets if hostilities intensify.

President of the National Chamber of Exporters of Sri Lanka, Indhra Kaushal Rajapaksa told The Island Financial Review that the situation is being closely monitored, as the export community is already feeling the early tremors of global instability.

“Sri Lanka may not be directly involved in the conflict, but we are deeply integrated into global supply chains. Any disruption in the Middle East immediately translates into higher costs and operational uncertainty for our exporters,” Rajapaksa said.

A major concern is the vulnerability of critical maritime corridors such as the Strait of Hormuz and the Red Sea, through which a significant share of global trade and oil shipments pass. Shipping lines have begun rerouting vessels and imposing emergency risk surcharges amid mounting security threats, while insurers are reassessing risk exposure in the region.

“Freight costs had only recently begun stabilising after the pandemic-era disruptions. Now, with vessels avoiding high-risk zones and insurers raising premiums, exporters are once again facing unpredictable shipping expenses,” he noted.

For time-sensitive exports such as apparel and perishables, delays could undermine Sri Lanka’s hard-earned reputation for reliability in competitive markets.

Exporters fear that prolonged instability could trigger sustained freight rate hikes similar to those witnessed during previous global disruptions.

The conflict has also driven global oil prices upward on fears of supply disruptions and shipping bottlenecks. Given that the Middle East accounts for a substantial share of global crude oil output, even perceived threats to supply have immediate price implications.

For Sri Lankan exporters, higher oil prices translate directly into increased fuel, electricity and transportation costs. Manufacturing sectors such as apparel, rubber products, plastics and food processing are particularly vulnerable, as energy forms a core input cost across operations.

“Energy is a fundamental cost component in nearly all export industries. When global oil prices rise, the impact cascades through logistics, production and even raw material pricing,” Rajapaksa explained, warning that sustained high energy costs could squeeze already thin margins.

Beyond cost pressures, the Middle East remains a crucial destination for Sri Lankan exports, especially tea and food products. Around 25 percent of Sri Lanka’s tea exports are shipped to Middle Eastern markets, making the region strategically important for the plantation sector.

“The Middle East is not just a transit route; it is a major market. If economic activity slows in those countries, or if banking and payment channels become complicated due to the conflict, our exporters will face direct consequences,” he cautioned.

War conditions also elevate trade finance and insurance risks. Cargo insurance premiums are climbing, and banks may adopt a more cautious stance toward trade credit involving affected regions.

Exporters could face payment delays, tighter financing conditions and higher compliance requirements, raising the overall cost and complexity of doing business.

This comes at a sensitive time for Sri Lanka’s economy, which is navigating recovery. Higher global oil prices would widen the import bill, potentially exerting pressure on the rupee and fuelling domestic inflation. While currency depreciation can sometimes enhance export competitiveness, rising input costs may offset any exchange rate advantage.

Despite the challenges, he pointed to potential opportunities if Sri Lanka responds strategically. As global buyers seek to diversify supply chains away from unstable regions, Sri Lanka could position itself as a reliable sourcing hub for apparel, rubber-based products, processed foods and value-added agricultural goods.

“In every global disruption there are risks, but there are also opportunities. If Sri Lanka strengthens trade facilitation, improves logistics efficiency and ensures policy consistency, we can attract buyers looking for stable alternatives,” he said.

He stressed that resilience and preparedness would be critical in the weeks ahead, as exporters closely watch developments in the Middle East and global energy markets, aware that distant conflicts can swiftly reshape local economic realities.

By Ifham Nizam

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Business

Middle East tensions may hit tourism and energy sectors

Published

9 hours ago

2026/03/17

Sahan Weerasooriya

Tourists admiring nature’s abundance in Sri Lanka.

Escalating geopolitical tensions in the Middle East involving Iran are beginning to raise concerns here, with analysts warning that the fallout could affect not only the island’s tourism industry but also its energy sector.

Tourism stakeholders say the first signs of a slowdown in visitor arrivals have begun to emerge as airlines and travel operators adjust to disruptions across key Middle Eastern aviation corridors.

According to Harsha Suriyapperuma, Chairman of the Sri Lanka Tourism Development Authority, the current tensions could temporarily influence travel flows mainly due to disruptions affecting major transit hubs in the Gulf region.

A significant share of travellers heading to Sri Lanka from Europe and other long-haul destinations transit through aviation hubs such as Dubai, Doha and Abu Dhabi.

Industry analysts say that when geopolitical tensions escalate in the Middle East, airlines often revise flight paths, cancel services or adjust schedules due to security concerns and airspace restrictions, which can slow tourism flows to destinations like Sri Lanka.

According to a Tourism industry leader, global travel demand is highly sensitive to geopolitical developments affecting major aviation corridors.

He noted that disruptions to Middle Eastern airspace could result in longer travel routes, higher airline operating costs and increased airfares, which may influence the travel decisions of tourists planning long-haul holidays.

At the same time, economists and energy analysts warn that the conflict could also create ripple effects in global energy markets.

Sri Lanka is heavily dependent on imported fuel, and any instability in the Middle East — particularly involving a major oil producer like Iran — could push global crude oil prices upward.

Energy sector sources said rising oil prices would increase the cost of fuel imports and place additional pressure on the country’s foreign exchange reserves.

Higher global oil prices could also raise operational costs in the power generation sector, particularly for thermal power plants operated by the Ceylon Electricity Board, which relies on fuel and coal imports to meet electricity demand.

Analysts say increased fuel costs could eventually translate into higher electricity generation costs and additional financial pressure on the national power utility.

The tourism sector had entered 2026 on a strong recovery trajectory after attracting more than two million visitors last year, with authorities targeting three million arrivals this year.

However, industry experts caution that prolonged geopolitical instability in the Middle East could slow the momentum of Sri Lanka’s tourism recovery while simultaneously creating new challenges for the country’s energy sector.

Despite these emerging risks, officials remain cautiously optimistic that the impact will be temporary if tensions in the region stabilise in the coming weeks.

They stress that Sri Lanka continues to be viewed internationally as a safe and attractive destination, while authorities are closely monitoring developments in global energy markets and aviation networks.

By Ifham Nizam

Business

NDB raises Sri Lanka’s largest Basel III-Compliant Thematic Bond

Published

9 hours ago

2026/03/17

Sahan Weerasooriya

Kelum Edirisinghe - Director, Chief Executive Officer

National Development Bank PLC (NDB/ the Bank) recently announced that it successfully raised LKR 16.0 billion through the issuance of Basel III-compliant Tier II Rated Unsecured Subordinated Redeemable GSS+ Bonds (the GSS+ Bonds), to be listed on the Colombo Stock Exchange (CSE). This issuance marks a major milestone in thematic fundraising within Sri Lanka’s capital markets landscape, signaling the country’s growing progress in the increasingly important segment of sustainable finance.

The GSS+ Bonds issue opened on 10 March 2026 and was oversubscribed within the same day, demonstrating strong demand from both retail and institutional investors. This response reaffirms the confidence investors place in NDB and its overall financial strength and stability. The issuance of the GSS+ Bonds reflects the Bank’s strong environmental and social considerations embedded in its lending practices. For many years, NDB has maintained a robust Environmental and Social Management System (ESMS) ensuring that funds are directed toward environmentally and socially responsible projects and causes.

NDB’s GSS+ Bonds will be deployed to finance eligible Green (including Blue), Social, Sustainability, and Sustainability-Linked projects, supporting environmentally responsible, socially impactful, and sustainable economic development.

Business

HNB General Insurance fastest in reaching LKR 11 Bn. revenue (GWP) within 10 years of operations

Published

9 hours ago

2026/03/17

Sahan Weerasooriya

Stuart Chapman - Chairman / Sithumina Jayasundara –CEO

HNB General Insurance Limited (HNBGI) announced its financial results for the year ended 31 December 2025, marking a milestone year of accelerated growth, strengthened financial resilience, and sustained business momentum.

The Company recorded a Gross Written Premium (GWP) of LKR 11.0 billion for 2025, reflecting a robust 21% growth compared to LKR 9.1 billion in 2024. This performance significantly outpaced the industry’s growth of 15%, demonstrating the Company’s strong competitive positioning, disciplined execution, and continued customer confidence. With this achievement, HNBGI becomes the first general insurer in Sri Lanka to reach the LKR 11 billion GWP milestone within ten years of operations. The Company also improved its market position, moving up to 6th place from 7th in Sri Lanka’s general insurance sector.

The Fire segment emerged as a standout contributor with a 27% growth, reaching LKR 2.4 billion, while the Motor portfolio grew by 25% to LKR 6.0 billion. Marine recorded a steady 16% increase to LKR 378 million, and the Miscellaneous segment contributed LKR 2.2 billion. The broad-based growth across segments reflects HNB General Insurance’s balanced portfolio, effective distribution reach, and strong customer confidence.

The Company demonstrated its unwavering commitment to customers through timely and efficient claims management, committing LKR 2.5 billion towards Ditwa cyclone-related claims. In addition, a further LKR 4.7 billion was paid in claims across all other segments during the year, underscoring the Company’s financial strength and reliability in times of need.

The Company’s financial strength further consolidated during the year, with Total Assets growing by a significant 31% to LKR 13.38 billion, while Funds Under Management increased by 9% to LKR 6.74 billion. The Capital Adequacy Ratio remained well above regulatory requirements at 190%, reflecting a solid capital base to support future growth.