Modern conflict no longer needs to destroy oil supply to destabilize the global economy — it only needs to inject doubt into the arteries of trade. As tensions involving Iran, the United States, and Israel ripple across the Gulf, the real economic shock lies not only in the possibility of a closure of the Strait of Hormuz, but in the risk premium now embedded in every barrel that moves through it. When nearly a fifth of the world’s oil flows through a corridor shadowed by missiles, naval patrols, and war-risk insurance surcharges, energy prices, freight rates, inflation expectations, and currency stability begin to reprice simultaneously.

For import-dependent economies like the Philippines, the transmission is swift. Higher fuel costs pressure the peso, compress corporate margins, and complicate monetary policy. In a global trading system built on uninterrupted movement, oil becomes the lever and Hormuz becomes the fulcrum through which geopolitical uncertainty is converted into global inflation.

Philippine oil markets are growing increasingly jittery as the Middle East conflict injects fresh volatility into global energy trading, raising fears that domestic pump prices could soon breach ₱90 per liter if crude continues its upward climb. 

Local fuel retailers have already implemented another round of price hikes — ₱1.90 per liter for gasoline, ₱1.20 for diesel, and ₱1.50 for kerosene — marking the eighth straight weekly increase this year for gasoline and the tenth for diesel and kerosene, as global markets price in geopolitical risk. 

Economists warn that, because the Philippines imports roughly 90% of its petroleum supply, price shocks transmit more directly to consumers than in many Asian economies with fuel subsidies, amplifying the inflationary impact of rising crude. With the Department of Energy (DOE) cautioning that tensions in the Gulf could push prices even higher in the coming weeks, the prospect of ₱90 per liter of gasoline is no longer a distant scenario but an emerging risk that could ripple through transport costs, electricity generation, and the broader cost of living across the country. 

The war zone

The Strait of Hormuz has long been recognized as the most sensitive energy chokepoint in the global economy. The narrow waterway — barely 21 miles wide at its tightest passage — still carries roughly 20 to 21 million barrels of oil per day, equivalent to about one-fifth of global consumption, along with nearly 20% of the world’s liquefied natural gas trade. In annualized terms, the energy value that passes through this corridor exceeds $600 billion. (READ: What is the Strait of Hormuz and why is it so important for oil?)

Recent geopolitical developments have revived the once-theoretical scenario of disruption. Analysts and shipping insurers have begun openly discussing the possibility that escalating tensions could temporarily halt or restrict traffic through the strait. Even without a physical blockade, the perception of vulnerability is enough to move markets. 

But the risk matrix has widened beyond transit.

Iran’s retaliatory posture has increasingly included threats against the broader Gulf energy ecosystem — storage terminals, processing plants, pipelines, export hubs, and the supporting infrastructure that sustains refining complexes. Unlike transit risk, which injects uncertainty into shipping schedules, infrastructure damage removes physical supply capacity from the system.

Global oil demand in 2026 is estimated at 103 to 104 million barrels per day. Spare production capacity — largely concentrated in Saudi Arabia and a handful of producers among the members of the Organization of the Petroleum Exporting Countries (OPEC) — is believed to hover around 4 to 5 million barrels per day under optimal conditions. If even 2 to 3 million barrels per day of Gulf production or export capacity were disrupted, markets would immediately price in the erosion of that cushion.

That distinction is critical.

A geopolitical risk premium can lift crude prices by $5 to $15 per barrel. A genuine supply shock — where barrels disappear from the market — can push prices $20 to $40 higher, particularly if spare capacity is politically constrained or slow to respond. In past attacks on Gulf energy infrastructure, crude benchmarks surged 10% to 20% within days.

The global energy system operates on tight balances. A 2% disruption in supply can trigger double-digit price volatility because demand for energy is highly inelastic in the short term. Airlines, shipping lines, power plants, and manufacturers cannot immediately reduce consumption. They absorb higher costs and pass them through.

Shipping markets hit

War-risk insurance premiums for vessels operating in the Gulf have surged from near-negligible peacetime levels to as high as 2% to 4% of cargo value for certain routes. For a supertanker carrying 2 million barrels of crude valued at $90 per barrel, that represents $3.6 million to $7.2 million in additional insurance cost per voyage. Charter rates for very large crude carriers have also jumped sharply as shipowners price in geopolitical risk.

If global crude rises from $80 to $110 per barrel — a 37% increase — energy-importing economies absorb the shock almost immediately. For the Philippines, which imports roughly 90% of its petroleum requirements, every sustained $10 increase in crude prices adds approximately ₱55 to ₱60 billion to the country’s annual oil import bill.

A $30 spike would therefore translate into roughly ₱165 to ₱180 billion in additional import costs, equivalent to 0.7% to 0.8% of gross domestic product (GDP). The country’s oil import bill — estimated at about $15 billion annually — could swell toward $20 billion if crude remains in triple-digit territory. That expansion alone would widen the current-account deficit and exert depreciation pressure on the peso.

Fuel inflation would follow quickly. A $30 increase in global crude could lift domestic pump prices by ₱15 to ₱20 per liter, depending on currency movement and tax pass-through. Several local energy monitoring groups have warned that, if crude sustains levels above $100 per barrel, Philippine retail gasoline prices could approach ₱90 per liter — a level that carries both psychological and economic consequences.

For households, that translates into higher commuting costs and more expensive food deliveries. For businesses, it raises logistics expenses across supply chains. For policymakers, it heightens the urgency of inflation management just as the economy attempts to sustain growth.

Electricity prices are not immune

Roughly one-third of Philippine power generation remains linked to imported fossil fuels, including coal and liquefied natural gas. Rising global fuel costs would eventually feed into generation charges, potentially pushing wholesale electricity prices 5% to 10% higher if energy markets tighten.

The possibility of such volatility is already prompting strategic reassessment within the country’s energy sector.

Meralco, the Philippines’ largest power distributor, has begun a comprehensive review of its fuel sourcing and procurement strategies. Meralco chairman and CEO Manuel V. Pangilinan initiated moves to anticipate potential disruptions in global energy markets and mitigate the transmission of price volatility into electricity rates.

Pangilinan has emphasized that the company’s priority is to help cushion consumers from rising global energy costs while ensuring stable power supply. Meralco has aligned these efforts with that of the Office of the President and the Department of Energy (DOE) to expand energy-efficiency practices across the economy.

Internally, the utility is implementing stricter energy conservation protocols, enhancing operational efficiency, optimizing fleet operations, and strengthening energy-monitoring systems. While such measures cannot shield the Philippines from global oil shocks, they represent a pre-emptive effort to soften their domestic impact.

Freight markets amplify the effect

Bunker fuel accounts for 40% to 60% of operating costs for ocean carriers. A sustained 30% increase in bunker prices could raise global freight rates 10% to 25%, even without a surge in demand. Philippine manufacturers importing intermediate goods would face higher logistics costs, thinner operating margins, and longer inventory cycles.

Corporate earnings statements will not reference missile strikes in the Gulf. They will show rising cost of sales, narrowing operating margins, and longer working-capital cycles.

That is how geopolitical shock migrates quietly into earnings season.

The broader global implication is sobering. The Gulf region accounts for roughly 30% of global seaborne oil exports. Disruptions affecting export terminals, pipelines, or refining infrastructure can ripple outward through the global supply chain because storage buffers are limited and modern trade operates on just-in-time logistics.

The modern energy market runs on narrow cushions. Remove part of that cushion, and volatility accelerates.

Like most energy-importing economies, the Philippines does not control this variable. It absorbs it.

If oil stabilizes around $90, the shock remains manageable. At $110, inflation management becomes significantly harder. At $120 or above, the Bangko Sentral ng Pilipinas (BSP) could face an uncomfortable choice between defending price stability and supporting economic growth. – Rappler.com

Sources: This analysis draws on verified reporting and market data from Reuters, Al Jazeera, and The Guardian, along with energy-market statistics from the U.S. Energy Information Administration, production and spare-capacity data from the Organization of the Petroleum Exporting Countries, and shipping and insurance benchmarks compiled by S&P Global Commodity Insights. Philippine energy demand, import exposure, and price-transmission estimates were derived from publicly available data from the Department of Energy, the Bangko Sentral ng Pilipinas, and industry disclosures including statements from Manila Electric Company regarding supply and fuel-risk assessments.

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