Iran war: Philippine fallout

The question I keep getting asked these days is how the Iran conflict will hit our economy. I’d point to three things—oil, remittances, and trade—disrupted in the wake of the ongoing war, which has also brought destruction to surrounding states. The first two threaten to be most severely disrupted, hence, the most destabilizing for us Filipinos. But our recent trade performance, with our exports having surged in 2025 despite a global trade slowdown blamed on hiked United States tariffs, gives me some hope that the impact through this channel would not be as severe (although, with bad luck, it can turn bad as well).

Everyone knows that the most direct impact is the disruption of global oil supplies not only from Iran but from the entire Middle East, because up to a fourth of global oil supplies pass through the Strait of Hormuz, which the war has shut off. An estimated 20 million barrels of crude oil pass through there daily, headed largely for Asia and Europe. The Philippines is among the most vulnerable to this disruption because we import 95 percent of our crude oil, 98 percent of it coming from the Middle East, mainly Saudi Arabia, the United Arab Emirates (UAE), and Iraq. In contrast, our neighbors Indonesia and Malaysia are oil exporters, while Thailand is able to supply up to 20 percent of its domestic oil requirements.

Our crude oil imports feed a limited oil refining industry, which could only supply about 35 percent of our gasoline, diesel, and kerosene requirements. So the remaining 65 percent are imported from refineries in neighbors like South Korea, China, and Malaysia. But that doesn’t lessen our vulnerability to the disruption because these neighbors’ refineries also rely on Middle Eastern oil that cannot get through the strait. On top of these are rising costs due to steep hikes in the insurance costs of shipping firms, longer routes taken by oil tankers, and market speculation by oil traders. All these have led to the P17 to P20 per liter fuel hike we’ve seen in the past week so far—and God knows where and when it will stop.

We must all brace ourselves for the domino effect of this steep rise in petroleum prices, which permeates through the entire economy through hiked transport and energy costs, raising the prices of nearly everything we buy. Analysts estimate that a $10 increase in crude oil price pushes up Philippine inflation by 0.5 percentage point (ppt), and we’ve already seen crude oil prices jump by $40 from $60 to $70 before the attack on Iran (hence a total inflationary impact of 2 ppts). Unless crude oil prices retreat somehow, our price increases threaten to breach the Bangko Sentral’s target maximum of 4 percent, as we had already seen an uptick to 2.4 percent in February before the war even broke out.

While prices here at home are at risk of drastic hikes, what worries the estimated 2 million Filipino workers in the Middle East is the uncertainty of keeping their jobs, or even of possible death or injury from bombs flying about. Historically, the largest repatriation from the Middle East involved 20,000 to 30,000 Filipinos flown out of Iraq, Kuwait, and Saudi Arabia in 1991 during the first Gulf War. But the largest repatriation on record happened during the pandemic, when over a million Filipinos were reported to have returned from various countries, with a major portion from the Middle East.

This time so far, 1,315 have been reported to have returned home since last month, with more than 1,400 said to be requesting repatriation. At a time when both the quantity and quality of employment have been declining here at home, the prospect of having tens of thousands of Filipino workers return home is something the government must plan and be prepared for. And the figure could conceivably run into hundreds of thousands if a wide conflagration breaks out, heaven forbid.

And then there’s the direct effect on the incomes of families of some 2 million Filipino workers in the Middle East. Even if they could somehow safely stay in place, their jobs are already affected by the disruptions the war has caused in their host countries. That means that the flow of remittances that has propelled our economy through the household consumption spending they fuel will see disruption and slowdown, even contraction at worst. Collectively, the Middle East directly accounts for about a fifth of our total cash remittances (which reached over $35 billion last year). Saudi Arabia, UAE, Qatar, Kuwait, and Bahrain are the top sources of our remittances from that region, and these same countries have already seen facilities destroyed by bombs from Iran.

All told, my PiTiK yardstick of presyo, trabaho, and kita (prices, jobs, and incomes) paints a dimmer picture of the economy on all three counts in 2026, even as it was already dimmed earlier by the flood control corruption scandal. Sadly, that has quickly faded into the background with no proper ending in sight.