BGC, Taguig City — Business groups have expressed growing concerns over the renewed conflict in the Middle East, noting it would likely impact the local economy, particularly in terms of energy prices and dollar remittances from overseas Filipino workers (OFWs).

According to bank holding firm Mitsubishi UFJ Financial Group (MUFG), with the Philippines highly dependent on imported oil and fuel, the country is among the most vulnerable in Asia if oil prices, which have surged in the wake of American and Israeli attacks on Iran, remain elevated.

In reaction, the Department of Energy (DoE) disclosed it was considering staggered fuel price hikes starting next week if the “conflict (in the Middle East) does not de-escalate.”

Foreign Buyers Association of the Philippines President Robert Young warned of supply chain disruptions that could affect Philippine exports while Philippine Chamber of Commerce and Industry (PCCI) President Perry Ferrer asserted that the conflict would “certainly impact the Philippines directly.”

Young and Ferrera both agreed that higher fuel prices will make commodities and imports costlier ”unless [an] agreement is reached within the week.”

In a statement, PCCI called on the Marcos Jr. administration to consider sourcing oil from other sources: “Our country sources 100 percent of its crude oil imports from the Middle East. With oil prices surging amid fears of disruption in the Strait of Hormuz, we call on the government to urgently explore and secure alternative sources of fuel supply to reduce our dependence on a single region.”

It likewise urged government to stabilize fuel prices, ensure an adequate supply of basic goods and deploy monetary tools to protect the peso. It also urged officials to safeguard Filipinos working in the Middle East, whose remittances fuel domestic consumption.

“Their safety and welfare is our most immediate and non-negotiable concern,” the PCCI stressed as it added that repatriated workers should also be provided livelihood and reintegration support.

Federation of Philippines chairman Elizabeth Lee also warned of higher fuel and electricity prices and logistics costs: “For manufacturers dependent on imported inputs, this may translate into higher freight costs, longer transit times and more expensive raw materials."

Meanwhile, MUFG forecasted that the peso could come under pressure from higher oil prices. It estimated that every US$10 per barrel increase in oil prices could weaken current account positions across Asia by about 0.2 to 0.9 percent of GDP, with the Philippines among the most affected purely from a balance-of-payments perspective.
It added that consumer price inflation could rise by roughly 0.1 to 0.9 percentage point across Asian economies following a US$10 per barrel increase in oil prices, with the Philippines, Thailand, Vietnam and South Korea facing the strongest upward pressure.

Oil prices closer to US$90 per barrel could push inflation in the Philippines toward the upper end of the central bank’s target range, adding to the challenge of managing price stability.