Home » TOURISM NEWS » Iran Joins Thailand, Malaysia, and Singapore in Slowing Southeast Asia’s Tourism Rebound, With Ongoing Middle East Conflict, Fuel Price Hikes, and Investor Concerns Threatening Long-Term Growth
Published on
March 29, 2026
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Iran’s slowing of its tourism sector amid the 2026 Middle East conflict is emerging as a new headwind in a region already grappling with faltering travel recovery, joining the likes of Thailand, Malaysia and Singapore in dampening Southeast Asia’s rebound. The ongoing war involving Iran has disrupted global aviation routes and driven up fuel costs as shipments through the Strait of Hormuz become more volatile, pushing airlines to raise airfares and prompting cancellations that ripple through long‑haul networks linking Europe and North America to Southeast Asia. This dynamic is compounding the post‑pandemic struggle for arrivals in destinations such as Thailand and Singapore, where higher travel costs and investor caution are eroding bookings and hospitality confidence. As geopolitical uncertainty persists and energy prices remain elevated, long‑term growth prospects for tourism in both the Middle East and Southeast Asia face mounting risks from reduced demand, increased operating costs and a more cautious investor outlook.
Institutional investors are showing renewed interest in Thailand’s tourism sector following recent market adjustments. However, many investors remain cautious due to ongoing geopolitical risks, which continue to influence global markets and the broader tourism landscape.
According to a recent report from Maybank Investment Bank, institutional clients have been paying more attention to Thai tourism stocks, signaling a shift from the trend observed at the end of 2025. While earlier in the year, this sector was largely ignored by institutional investors due to factors such as low dividend yields and high levels of debt, the recent market corrections have made the sector more appealing. This renewed interest follows a global market correction triggered by the ongoing conflict in the Middle East, which has reduced stock valuations in the tourism sector to more attractive levels.
Before the correction, Thailand’s tourism sector faced headwinds such as high levels of gearing (debt relative to equity) and lower-than-desired dividend yields, which led many institutional investors to avoid the space. The sector’s perceived lack of profitability and its risk profile, largely due to its reliance on external factors like global travel trends and geopolitical stability, made it an unattractive investment opportunity.
The current correction, however, has resulted in a significant dip in valuations, making some Thai tourism stocks look more affordable to institutional investors. Despite the market adjustments, caution remains the dominant sentiment. Investors are still wary of the prolonged geopolitical risks and their potential impact on travel demand, especially in regions like Southeast Asia. Furthermore, rising airfares continue to be a concern, as they could dampen the demand for both regional and long-haul travel.
In addition to these concerns, some investors see a potential upside in the sector. The ongoing geopolitical instability, particularly in the Middle East, could potentially lead Asian travelers to shift their focus from long-haul trips to Europe, toward more accessible regional destinations like Thailand. This scenario could benefit Thailand’s tourism sector, as it would draw in more visitors from Asia who may otherwise have traveled to Europe. As a result, Thailand could see an uptick in tourism despite global uncertainty, creating a potentially profitable opportunity for those with a long-term investment horizon.
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Among the companies being closely scrutinized by institutional investors, some have garnered attention due to their relatively defensive positions within the sector. The interest is mainly in firms that are perceived to have a stable business model, with a solid market presence in Thailand and a diverse portfolio. This includes companies that have relatively low exposure to geopolitical risk and that are focused on catering to domestic and regional markets, rather than relying heavily on international tourists.
However, even within this more defensive group, several risks remain. One key concern centers on the expansion strategies of certain companies, particularly those using asset-light models. For example, companies that rely on partnerships with Middle Eastern entities may face constraints in growing their businesses, as geopolitical tensions could hinder expansion plans. This is especially true for those with large portions of their growth pipeline tied to the Middle East.
Another significant risk involves the aviation sector, which is a crucial component of Thailand’s tourism industry. Airlines, especially those with substantial exposure to fuel price fluctuations, are facing challenges in maintaining profitability amidst rising operational costs. For instance, one Thai airline has only hedged a small portion of its fuel consumption for the next fiscal year, leaving it vulnerable to fuel price volatility. While the airline industry is recovering from pandemic-era disruptions, rising operational costs, combined with fluctuating demand, continue to be a key concern for investors.
Despite these challenges, some companies in the sector are still favored by institutional investors due to their resilience and strong market positioning. Airports of Thailand, for example, remains a top pick for Maybank Investment Bank. The company is expected to be less affected by geopolitical instability compared to others in the tourism space. Furthermore, Airports of Thailand could benefit from an increase in transit and transfer passengers. As the Middle East aviation hubs recover, international travelers might opt for transiting through Thailand, rather than the Gulf hubs, due to concerns about safety and stability. This could help boost passenger traffic at Thai airports and provide a buffer against external disruptions.
Despite the positive outlook for certain companies, some investors are still skeptical about near-term travel demand, especially in light of the global geopolitical situation and rising airfares. The upcoming summer travel season is a particular point of concern, with some questioning whether Thailand will see a full recovery in inbound tourism, especially from markets that typically send large numbers of travelers during this period, such as the Middle East and Europe.
On the supply side, airlines are beginning to resume flight services from several Gulf states. However, flight capacity remains significantly below pre-conflict levels, with many airlines operating at less than half of their normal capacity. Although the summer months are traditionally a low season for European and Middle Eastern arrivals, concerns are growing about whether these markets will fully recover in time for the peak tourist season in Thailand, which begins around June and lasts through August. The Middle East, in particular, is an important source of international tourists for Thailand, and delays in the full recovery of flight services could dampen the country’s tourism outlook.
Within the hospitality sector, there are positive signs from certain companies that are well-positioned to capitalize on the recovery. The Erawan Group is one such example, as it is expected to benefit from the strong growth prospects of its budget hotel chain, HOP INN. The chain is on track for a planned spin-off in 2027, and its attractive valuation makes it a potential investment opportunity. As budget travel continues to grow in popularity, especially in a post-pandemic world where cost-conscious travelers are increasingly seeking affordable accommodations, companies like The Erawan Group stand to benefit.
For airlines, Bangkok Airways is another company that remains favored by investors. Unlike its larger peers, such as Thai Airways, Bangkok Airways is seen as having stronger passenger yields and more resilient bookings, particularly on its key routes such as the Samui route, which generates a large portion of its revenue. The airline’s focus on niche markets and smaller airports gives it a competitive advantage in a highly fragmented industry.
Iran’s ongoing conflict, coupled with fuel price hikes and investor concerns, has joined Thailand, Malaysia, and Singapore in slowing Southeast Asia’s tourism rebound, as geopolitical instability and rising travel costs deter long-term growth in the region.
Overall, while institutional investors remain cautious about the short-term outlook for Thailand’s tourism sector, many are still closely monitoring developments. With ongoing geopolitical tensions and rising fuel prices, the market sentiment is cautious. However, there is also optimism that Thailand could benefit from a shift in travel patterns as travelers seek alternatives to longer, more expensive trips to Europe. Many institutional investors are holding off on making significant allocations in the sector until they see clearer signs of stabilization and de-escalation in global conflicts.
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