Surging Oil Prices Hit Philippines as Middle East Tensions Rise

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The Philippines finds itself significantly impacted by rising oil prices, heavily reliant on imports from the Middle East, where ongoing missile attacks threaten supply. With almost 90% of its oil sourced from this region, the country faces increased inflation pressures as fuel prices remain largely market-driven, with limited subsidies available to cushion the blow.

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In contrast, economies like Indonesia, Thailand, and India are somewhat shielded by subsidies or regulated pricing mechanisms. According to ING Group's Deepali Bhargava, the Persian Gulf supplies most of the crude oil to the Philippines and Japan. The recent closure of the Strait of Hormuz by Iran heightens the risk of supply shortages, potentially slowing business activities across Asia.

Singapore's Oversea-Chinese Banking Corp. Ltd. (OCBC) echoes similar concerns, noting that the Philippines, along with India, Indonesia, Malaysia, Thailand, and Vietnam, faces challenges in maintaining trade balances due to their status as net oil importers. A significant increase in oil prices could deteriorate current account balances by up to 60 basis points, potentially widening the Philippine deficit beyond three percent of GDP.

The prolonged oil price rise may also push inflation higher, compounded by a weaker peso against the US dollar. Higher import costs could further elevate fuel and transport prices, impacting the consumer price index, where food accounts for a significant portion. ING anticipates local inflation remaining within the central bank's target of two to four percent, but a sustained price hike could push it to the upper threshold.

The situation presents a challenge for monetary policy. Despite the pressures, there are expectations for continued policy easing, particularly in the Philippines and Thailand, as noted by Capital Economics. They suggest that, despite inflation risks, most economies still maintain their inflation targets, indicating room for further policy adjustments, reported Manila Bulletin.

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  Adapted by ASEAN Now · Manila Bulletin · 03 Mar 2026