Sri Lanka, April 21 -- Sri Lanka's fragile economic recovery faces a new threat - the potential fallout from an escalating conflict between Israel and Iran and spillovers to the wider Middle East. While geographically distant, Sri Lanka is certainly vulnerable to disruptions in the Middle East, a region crucial for global oil supplies and international trade. Let's explore the key channels through which an intensified Israel-Iran conflict could cause substantial external headwinds to Sri Lanka - headwinds that the country can ill afford to face right now.

US Treasury Secretary Janet Yellen observed this week that "economic spillovers" from the heightened tensions in the region could hurt global economic prospects. The International Monet...