The ongoing conflict between Thailand and Cambodia has severely impacted border trade, especially at the Klong Luek–Poipet crossing, disrupting approximately $4.7 billion (174.5 billion Baht) worth of annual commerce. Additionally, a joint project to develop vast natural gas reserves in the Gulf of Thailand’s Overlapping Claims Area, valued at over 10 trillion Baht, has been indefinitely suspended.
The crisis has led to a significant labor shortage in Thailand due to the departure of about 780,000 Cambodian workers and caused a drastic decline in border tourism, further destabilizing the region’s economy. These border disruptions and the exodus of workers are creating economic ripple effects across Southeast Asia, threatening to stall a major multi-trillion-baht energy project.
What started as a territorial dispute has evolved into a broader “Economic, Political, and Geopolitical War” in 2025, causing serious economic damage to both nations. The immediate impact was the paralysis of vital trade at the Klong Luek–Poipet border crossing, disrupting supply chains and regional trade.
The conflict has also resulted in a shortage of Cambodian labor in Thailand and a collapse in border tourism, which was declared a “Conflict Zone.”
Path to Conflict
Tensions intensified following clashes in the Emerald Triangle, escalating quickly into a “Five-Day War” from July 24-28, resulting in at least 48 deaths and the displacement of over 300,000 civilians. Despite a peace agreement signed in Kuala Lumpur on October 26, which brought brief respite, the situation soon deteriorated again. Renewed violence, bombings, and accusations led Thailand to declare “peace is over,” with hostilities resuming including aerial bombings from December 8, and ongoing clashes along the 800-kilometer border.
Trade and Investment Disruption
The indefinite closure of the Klong Luek–Poipet crossing has halted border trade valued at around 174.5 billion Baht annually (roughly $4.7 billion). Thailand’s exports—covering consumer goods, fuel, and construction materials—have been cut off, disrupting essential supply chains for Cambodian manufacturing industries like starch, ethanol, and steel, which rely on Thai raw materials such as cassava and scrap metal.
According to the Centre for Economic and Business Forecasting at the University of the Thai Chamber of Commerce (UTCC), prolonged border closures could lead to a loss of about 66.61 billion Baht in Thai exports and 20.37 billion Baht in imports in a year, potentially causing a 0.74% contraction in Thai GDP in 2026. Cambodia, dependent on Thai capital goods, faces inflationary pressures as well. The entire regional logistics system has stalled, forcing rerouting of shipments through Vietnam and Laos, increasing transportation costs by 25-40% and stressing regional supply chains.
Labor and Tourism Collapse
The conflict and rumors of security operations sparked a mass departure of Cambodian migrant workers from Thailand. About 780,000 workers returned home rapidly, causing an acute labor shortage in sectors like construction, fishing, and agriculture, which in turn raised wages. The border tourism industry has also collapsed, further deepening economic instability in the region.