Bangkok: SCB Economic Intelligence Center (EIC) has raised concerns about the potential impact of the Middle East conflict on both the global and Thai economies, with oil prices potentially surging beyond $100 per barrel.
According to Thai News Agency, the EIC has analyzed the situation, suggesting that if Iran were to close the Strait of Hormuz for a period of 2-6 weeks, oil prices could initially reach $75 per barrel. However, if the conflict escalates into a broader regional war, these prices could spike up to $107 per barrel, significantly affecting global inflation and potentially slowing the Thai economy by 0.3-0.8% by 2026.
The Economic and Business Research Center of Siam Commercial Bank (SCB EIC) has outlined a baseline scenario involving attacks on energy infrastructure and a temporary closure of the Strait of Hormuz. This could result in the average Brent crude oil price rising to approximately US$75 per barrel. However, if the conflict disrupts energy transportation more severely, prices could escalate to US$107 per barrel.
SCB EIC has indicated that such increases in oil prices would likely accelerate global inflation by roughly 0.4%, potentially reducing global economic growth by 0.2-0.4%. This inflationary pressure might prompt major central banks, including the US Federal Reserve, to delay monetary easing policies, adopting a cautious approach due to heightened inflation risks.
For Thailand, the EIC estimates that an increase in Brent oil prices to $75 could slow the economy by about 0.3% by 2026. In a more severe scenario, where prices hit $107, the economic slowdown could reach 0.8%. Thai inflation is expected to rise to around 1.5% in 2026, potentially aligning with the target range of 1-3% sooner due to increased energy prices. In the case of a regional war, inflation could exceed 4%.
The SCB EIC also suggests that the Monetary Policy Committee (MPC) in Thailand may find opportunities to ease monetary policies further if the Middle East conflict significantly impacts the economic outlook.
While Thai exports to the Middle East are relatively limited, certain sectors, including agriculture and the automotive industry, depend on this market. Businesses may face challenges from increased energy costs, transportation issues, and rising raw material prices, affecting supply chains. The tourism and healthcare industries are also at risk due to potential travel restrictions and security concerns.
Conversely, essential agricultural products, food items, and some energy crops may benefit from increased stockpiling and rising global market prices.