BSP Warns Oil Shock Could Hit Peso and Inflation Amid Mideast War
The central bank said it will intervene in foreign exchange markets only to smooth excess volatility, not defend any specific peso level, as Middle East conflict threatens oil supply stability.
Key Takeaway
BSP won't defend a specific peso level but will intervene only if volatility threatens inflation targets.
Bangko Sentral ng Pilipinas said it hopes for the safety of overseas Filipino workers and other civilians as it assesses the economic impact of escalating Middle East conflict.
The central bank is monitoring how higher oil prices could affect fertilizer costs, transport fares, and general inflation. BSP also said it's tracking effects on the current account, remittances, trade flows, and financial markets. The Philippines imports roughly 90 percent of its oil from the Middle East, making the economy vulnerable to supply disruptions through the Strait of Hormuz.
Over 30,000 OFWs in Israel were sheltering as of mid-March 2026 after waves of attacks in the region. Philippine Institute for Development Studies senior research fellow John Paolo Rivera warned that sharp crude price rises could widen the trade deficit, pressure the peso, and disrupt remittance flows amid global risk aversion. Foundation for Economic Freedom president Calixto Chikiamco said prolonged conflict risks peso depreciation and potential terrorist attacks against U.S. interests in the Philippines if Iranian government actions persist.
BSP stressed that price stability remains its main mandate. The central bank said it operates in the foreign exchange market to smooth excess volatility and maintain orderly conditions, with intervention limited to tempering large swings that could affect inflation rather than defending any specific level. Finance Secretary Frederick Go projected the conflict will have a short-lived and limited effect on the Philippine economy. But if oil price surges persist for six months, the conflict could reduce GDP growth more pronouncedly versus less than 10 basis points if short-term. BSP holds its next monetary policy meeting on April 23, 2026.
🇵🇭 What This Means for Filipinos: Rising oil prices hit Filipino households through higher transport fares and more expensive goods like fertilizer that raise food costs. OFW remittances could slow if global risk aversion disrupts money transfer channels. Peso depreciation makes imported goods costlier for Filipino consumers. BSP's April 23 policy decision will signal whether interest rates stay elevated to fight inflation or cut to support growth.
