THE ONGOING Middle East conflict has had a “minimal” impact on the Philippine economy, the government said on Tuesday.

On the other hand, analysts said that another surge in global oil prices may trigger a renewed spike in inflation in the Philippines.

“The impact is so minimal on our economy that it doesn’t seem alarming as of now, as long as [global oil prices] don’t increase or the conflict worsens,” Department of Energy Officer-in-Charge Sharon S. Garin said, quoting the assessment of Department of Economy, Planning, and Development Secretary Arsenio M. Balisacan.

President Ferdinand R. Marcos, Jr. on Tuesday held a meeting with economic managers to discuss the ongoing Middle East conflict.

“The President’s order is still that we make sure that we protect the Filipino people from the impact of the oil price hike, meaning, most especially those who use public utility vehicles, our farmers, and our fishermen,” Ms. Garin added.

The Philippines, a net importer of oil, is highly sensitive to sharp fluctuations in global oil prices.

“Oil prices are a significant contributor to inflation in the Philippines. Our analysis suggests that a 10% oil price shock contributes 0.3-0.4 percentage point (ppt) to headline consumer price index, all else equal,” Krisjanis Krustins, Asia-Pacific Sovereign Ratings director at Fitch Ratings told BusinessWorld.

However, the “final impact” of the war will rest on the duration and size of the oil price shock, Mr. Krustins said.

After surging on Monday, oil prices fell after US President Donald J. Trump announced a ceasefire between the Iran and Israel. Reuters reported that oil prices duly slumped almost 3% on Tuesday, on top of an almost 9% tumble overnight as the immediate threat to the vital Strait of Hormuz shipping lane appeared to have lessened.

US crude futures are back at $66.80 per barrel, about the lowest since June 11 before Israel’s attacks on Iran began.

“Likely to speed up inflation, as we import oil primarily. Oil, being a production input that links to many other industries, can trigger price increases down the line,” Ateneo Center for Economic Research and Development Director Ser Percival K. Peña-Reyes told BusinessWorld.

Inflation cooled to an over five-year low of 1.3% in May, as utility costs rose at a slower pace. This brought the five-month average to 1.9%, slightly below the BSP’s 2-4% target band.

S&P Global Market Intelligence Principal Economist Harumi Taguchi said inflation could settle to 2.3% in the second half and less than 2% for the full year.

“The situation is still uncertain, but assuming the oil prices stay around the current $75 per barrel and the peso remains at the current level through this end of the year,” Ms. Taguchi said in an interview on Money Talks with Cathy Yang on One News on Tuesday.

If oil prices surge to over $100 per barrel, inflation will likely accelerate to over 4% in the first half of 2026, she said.

The Bangko Sentral ng Pilipinas (BSP) last week slashed its inflation forecast to 1.6% for this year from 2.4% but noted that higher oil prices could add to inflationary pressures.

BSP Governor Eli M. Remolona, Jr. earlier warned that rising global oil prices and the weakening peso could bring inflation to 5%, breaching the 2-4% target range.

Rizal Commercial Banking Corp. Chief Economist Michael L. Ricafort projected a 0.5-0.7-ppt increase in inflation if crude oil prices remain elevated.

“The resulting higher local fuel pump prices would lead to higher prices of other goods and services, passing the effects of higher world crude oil prices and weaker peso recently, thereby could lead to some pickup in overall inflation,” he said in a Viber message.

Local fuel retailers implemented the first tranche of the oil price hike on Tuesday, while some firms are implementing the second tranche either on Thursday or Friday.

The total price increase for the week is P3.50 per liter for gasoline, P5.20 per liter for diesel, and P4.80 per liter for kerosene.

ANZ Research said the Philippine inflation will likely see a 0.1% uptick in the near term, citing oil’s relatively low weight in the Philippine CPI basket at 2.4%.

“While the Philippines and mainland China have seen a larger rise in pump prices, vehicle fuels make up a smaller share of their inflation basket,” it said in a note.

Mr. Ricafort also warned that the biggest risk for global crude oil supply is the disruption in the Strait of Hormuz, where 20% of the world’s supply passes through.

GlobalSource Partners Country Analyst Diwa C. Guinigundo said a sharp increase in petroleum prices could trigger higher prices for food and nonfood commodities.

“If JPMorgan’s oil price forecast of between $120 and $130 per barrel materializes over a prolonged period, it’s likely that we see a breach of the 2-4% inflation target,” Mr. Guinigundo told BusinessWorld.

The former BSP deputy governor also said second-round effects may be felt such as higher wages and transport fares.

Pantheon Macroeconomics Chief Emerging Asia Economist Miguel Chanco said the crude oil price trend is “not yet explicitly inflationary,” noting Brent crude remains 9% lower year on year.

“Reassuringly as well, oil futures still point to prices starting to calm down from September onwards,” he said.

He also said the risks to inflation globally, and not just the Philippines are now skewed to the upside.

“The good news from the Philippines’ standpoint is that it can arguably tolerate a rise in oil prices and, by extension, transport prices (etc.), given how low headline inflation has sank this year,” he said.

The Philippine Statistics Authority is set to release June inflation data on July 4, but analysts said the impact of the latest oil price spike will likely to be felt in the next two months.

‘WORSE’ THAN RUSSIA-UKRAINE WAR
Mr. Peña-Reyes warned that the inflationary impact could be similar or “possibly worse” compared to the Russia-Ukraine war, which started in 2022.

During the onset of the war in late February, Philippine inflation spiked to 4% in March followed to 4.9% in April. It further stretched to 8% levels in November and December.

“It’s possible to see a similar situation that we saw during the Russia-Ukraine if this war is escalated with both the participation of Europe aside from the US as well as those more sympathetic to Iran like China and Russia,” Mr. Guinigundo said.

He also anticipated some retaliation that may set off a “train of global uncertainties and volatilities.”

“The 35% increase in global prices in 2022 took place over five months and was from a higher base of around $80/barrel,” IBON Foundation Executive Director Jose Enrique “Sonny” A. Africa said.

“Even though we’re starting from a lower base now, the current situation is, however, many times more alarming because the turmoil from the US-Israel-driven conflict is escalating in the major oil-producing region of the Middle East.”

Mr. Africa also recalled that oil prices doubled during past regional conflicts, such as the Iran-Iraq War, the Gulf War, and the US invasion of Iraq.

“If the week-long surge extends into months because of continued US-Israeli aggression, it is not unlikely to see another doubling of oil prices to $130 or more with huge effects on domestic inflation and further second-round effects from greater global economic turmoil,” Mr. Africa said.

He criticized short-term government measures like fuel subsidies as insufficient, urging structural reforms to reduce dependence on imported oil and food. — Aubrey Rose A. Inosante with Chloe Mari A. Hufana