War on Iran could push PH inflation to near 4%

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5 Key Insights on How the War on Iran Could Push PH Inflation to Near 4%

The ongoing conflict in the Middle East has reintroduced volatility into global energy markets, with far-reaching implications for the Philippine economy. As the region remains a critical oil supplier, any sustained disruption could impact global supply and inflation expectations. In this blog post, we'll explore the 5 key insights on how the war on Iran could push Philippine inflation to near 4%.

Insight #1 Oil Prices Set to Rise

According to Bank of the Philippine Islands (BPI) lead economist Emilio Neri Jr., a renewed leg higher in global oil prices could amplify second-round effects through transport, electricity, and logistics costs, potentially broadening inflationary pressures beyond food and fuel. Under a moderate escalation, oil prices could rise to $75 to $80 per barrel, while a prolonged blockade of the Strait of Hormuz could see prices surge to $100 to $120 per barrel.

Insight #2 Inflation Expectations to Rise

Higher oil prices could compound existing rice-driven inflation pressures. BPI expects February inflation to have risen from 2.0 percent in January. With fuel prices a particular concern, President Ferdinand Marcos Jr. is considering asking Congress to grant him emergency powers to lower fuel excise taxes if Dubai crude tops $80 per barrel.

Insight #3 Remittances at Risk of Decline

The conflict poses downside risks to remittance flows, as nearly 40 percent of overseas Filipino workers are based in the Middle East. However, cash remittances from the region accounted for just 18 percent, or $6.5 billion, of total inflows of $35.6 billion in 2025, suggesting that while risks are elevated, the overall impact may be contained unless the conflict significantly escalates.

Insight #4 Food Prices to Rise

The Department of Agriculture (DA) warns that a disruption of supply could affect commodities such as fertilizers and also raise logistics costs. Costs of imported products like wheat and animal feed could also rise, which may then translate to higher retail prices of bread, pork, poultry, and livestock. The DA notes that this would complicate the government's efforts in managing food inflation.

Insight #5 Ad Hoc Measures to Mitigate Inflationary Pressures

To mitigate the impact of the war on Iran on food prices and the farm sector, the government may need to implement ad hoc measures, such as staggering fuel price hikes, providing fuel subsidies to the transport and agriculture sectors, and managing the supply chain to ensure a steady flow of essential goods.

In conclusion, the war on Iran poses significant risks to the Philippine economy, including higher inflation expectations, remittance risks, and food price increases. To manage these risks, the government may need to implement ad hoc measures to stabilize the economy and ensure the safety of Filipinos in the region.

Edward Lance Arellano Lorilla

CEO / Co-Founder

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