Iran Joins Thailand, Malaysia, and Singapore in Slowing Southeast Asian Tourism, With Ongoing Middle East Conflict, Rising Oil Prices, and Investor Concerns Threatening Long-Term Growth – Travel & Tourism World

Iran’s decline in its share of tourism during the Middle East conflicts of 2026 is emerging as a new storm in a region that is already struggling with the recovery of travel, joining countries such as Thailand, Malaysia and Singapore in undermining the return of Southeast Asia. The ongoing war involving Iran has disrupted the world’s air routes and increased the cost of fuel as cargo through the Strait of Hormuz worsens, forcing airlines to raise airfares and causing major cancellations on long-haul networks connecting Europe with North America and Southeast Asia. This is adding to the post-pandemic battle for arrivals in places like Thailand and Singapore, where high travel costs and investor wariness are undermining bookings and traveler confidence. As environmental uncertainty continues and energy prices continue to rise, long-term tourism growth opportunities in the Middle East and Southeast Asia face risks from reduced demand, increased operating costs and a cautious investor outlook.

Institutional investors are showing renewed interest in Thailand’s tourism sector following recent market changes. However, many investors remain cautious due to ongoing environmental risks, which continue to influence global markets and the wider tourism sector.

According to the latest report from Maybank Investment Bank, institutional buyers have been paying more attention to tourism properties in Thailand, which shows a change from the trend observed at the end of 2025. Although earlier this year, this sector was largely ignored by institutional investors due to factors such as low interest rates and high debt, recent market corrections have made this sector more appealing. This renewed interest follows the correction of the world market caused by the ongoing conflict in the Middle East, which has reduced the prices of goods in the tourism sector to more attractive levels.

Before the reform, Thailand’s tourism sector faced problems such as high leverage (debt-to-equity) and lower-than-expected yields, which made many investors shy away from the area. The sector’s perceived lack of profitability and risk profile, particularly due to its dependence on external factors such as global travel trends and environmental sustainability, have made it an unattractive investment opportunity.

However, the current correction has caused a sharp drop in valuations, making Thailand’s tourism stocks look less expensive for institutional investors. Despite the changes in the market, awareness is still the main concern. Investors remain wary of long-term environmental risks and their impact on travel demand, particularly in regions such as Southeast Asia. In addition, rising airfares are a concern, as they may reduce demand for local and long-haul travel.

Despite these concerns, some investors see potential in the sector. Continued political instability, particularly in the Middle East, may cause Asian travelers to shift their focus away from long-distance travel to Europe, towards more accessible destinations such as Thailand. This situation can benefit Thailand’s tourism sector, as it can attract more tourists from Asia who might have gone to Europe. As a result, Thailand has seen growth in tourism despite global uncertainty, creating a potentially lucrative opportunity for those with long-term investment prospects.

Among the companies closely scrutinized by institutional investors, some have gained attention because of their defensive positions within the sector. Interest is mainly in firms that are considered to have a sustainable business model, with a solid market in Thailand and a diverse portfolio. This includes companies that have relatively low exposure to environmental risk and that focus on serving the local and regional market, rather than relying heavily on international tourists.

However, even within this more defensive category, there are a few risks. Another concern is the expansion strategies of certain companies, especially those that use types of lighting equipment. For example, companies that rely on cooperation with organizations in the Middle East may face difficulties in expanding their businesses, as environmental conflicts may hinder expansion plans. This is especially true for those who have large parts of their growth pipeline connected to the Middle East.

Another major risk involves the aviation sector, which is an important part of Thailand’s tourism industry. Airlines, especially those exposed to a sharp drop in fuel prices, are facing challenges in maintaining profitability amid rising operating costs. For example, one Thai airline has restricted only a small portion of its fuel consumption for the next financial year, leaving it vulnerable to changes in fuel prices. As the airline industry recovers from the pressures of the pandemic, rising operating costs, combined with changing demand, continue to be a key issue for investors.

Despite these challenges, some companies in this sector are still favored by institutional investors due to their stability and strong market position. For example, the airport in Thailand is still the main choice for Maybank Investment Bank. The company is expected to be less affected by political instability compared to others in the tourism sector. In addition, Thailand Airport can benefit from increased traffic and transfer passengers. As Middle East airports recover, international travelers may choose to fly through Thailand, rather than Gulf hubs, due to concerns about safety and stability. This can help increase passenger traffic at Thai airports and provide protection against external interference.

Despite the positive outlook for some companies, some investors remain skeptical about near-term travel demand, especially given the global political climate and rising airfares. The upcoming summer travel season is a point of concern, with some wondering whether Thailand will see a complete recovery in inbound tourism, especially in markets that typically send large numbers of visitors this season, such as the Middle East and Europe.

On the supply side, airlines are starting to start flight services from several Gulf states. However, aircraft power remains below pre-conflict levels, with many aircraft operating at less than half their normal power. While the summer months are typically a low season for arrivals from Europe and the Middle East, concerns are growing about whether these markets will fully recover in time for Thailand’s peak tourist season, which runs from June to August. The Middle East, in particular, is an important source of international tourists for Thailand, and a delay in the full recovery of air services could undermine the country’s tourism prospects.

Within the hospitality sector, there are positive signs from certain companies that are well positioned to benefit from 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 in line for a planned turnaround in 2027, and its attractive value makes it an investment opportunity. As budget travel continues to grow in popularity, especially in a post-pandemic world where cost-conscious travelers are looking for affordable accommodation, companies like The Erawan Group will benefit.

For airlines, Bangkok Airways is another company that is becoming popular with investors. Unlike its larger peers, such as Thai Airways, Bangkok Airways is seen to have a strong passenger yield and stronger bookings, especially on its key routes such as the Samui route, which generates a large portion of its revenue. The airline’s focus on exotic markets and smaller airports gives it a competitive advantage in a highly fragmented industry.

The ongoing conflict in Iran, along with rising fuel prices and investor concerns, has joined Thailand, Malaysia and Singapore in reducing tourism to Southeast Asia, as political instability and rising travel prices hamper long-term growth in the region.

Overall, while institutional investors remain cautious about the short-term outlook for Thailand’s tourism sector, many are keeping a close eye on developments. With continued political tension and rising fuel prices, market sentiment is cautious. However, there is also hope that Thailand could benefit from a change in travel patterns as travelers look for alternatives to the long, expensive journeys to Europe. Many institutional investors are still reluctant to give large allocations to this sector until they see clear signs of stability and a decline in global tensions.