Asia’s sovereign debt burden is not a background concern any longer. A volatile mix of the Iran war energy shock, a higher global rate environment and localised currency stress has drained fiscal headroom across the region just when the governments require more of it.

This report examines the fallout, why this shock looks different from previous episodes and how the choices facing Asian finance ministries—austerity versus support, external versus domestic financing and climate goals versus energy security—are reshaping banks, corporates and cross-border capital flows.