The peso is at risk of sinking to a record low beyond 61 per dollar as escalating Middle East hostilities threaten to choke global energy supplies and force a hawkish pivot from the Bangko Sentral ng Pilipinas (BSP).

Michael Wan, MUFG Bank Ltd. senior currency analyst, warned in a research note on Monday, March 9, that the local currency remains highly vulnerable to a sustained conflict between Israel and Iran.

“We see the peso as vulnerable and the US dollar-peso possibly rising above the 60 level if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed, with oil prices already reaching above $100 per barrel (bbl) at the time of writing,” Wan said.

As of early Monday, March 9, the peso weakened toward an all-time low as an escalating military conflict in the Middle East drove investors to the safety of the US dollar.

The peso opened the trading week at 59.25 per dollar, then hit its weakest level of 59.6, according to the Bankers Association of the Philippines (BAP).

This marked a significant drop from last Friday’s 59.00 finish and pushed the peso past its previous record low of 59.44 set on Jan. 14.

Rizal Commercial Banking Corp. chief economist Michael Ricafort said this slump followed a sharp spike in global oil prices.

Nymex crude climbed to about $115 per barrel—its highest level in nearly four years since June 2022—after earlier reaching an intraday high of $119.48, up by 27 percent from last Friday’s close of $90.90.

He said a surge in oil prices could hike the country’s import bill, widen the trade gap, increase the cost of imported fuel, potentially leading to higher transport fares, wages, and prices of other goods and services.

Wan said that while the direction of the ongoing war remains uncertain, he has already priced in the peso to fluctuate up to 61 per US dollar if oil prices surge to $100 per bbl, especially if compounded by the US Federal Reserve’s policy levels.

MUFG, in particular, estimates that the US dollar-peso pair could range between 59 and 60 if oil prices accelerate to $90 per barrel, and between 60 and 61 with $100 per bbl oil prices.

Meanwhile, if the Israel-Iran conflict gets resolved by the end of March and oil costs ease back to $70 per bbl, the foreign exchange (forex) rate is likely to settle at ₱58:$1 by end-2026, Wan explained.

Wan noted that the Philippine monetary authorities still hold their final policy position amid the ongoing war. “Not all things are equal in practice, and the BSP may choose to not just pause on policy rates but even hike rates, which would provide some offsetting support to the peso,” Wan said.

Frankfurt-based Deutsche Bank AG said Asian economies remain “vulnerable” to both price pressures and economic shocks stemming from soaring oil prices even as most economies in the region have reduced their reliance on Iranian oil to “negligible” levels.

According to the German lender, Asian banks, including the BSP, are likely to view this development as a shock to consumer price movements. Such a risk would require a more hawkish tone on the policy front.

Last week, BSP Governor Eli M. Remolona Jr. warned that the central bank might have to “tighten” monetary policy should oil prices hit $100 per barrel—which has already been breached as of writing.

To date, the Monetary Board (MB) has set the key borrowing cost at 4.25 percent on the back of the disappointing economy in 2025 and still tame inflation.

Deutsche Bank reiterated its warning that in case of a sustained blockage of the Strait of Hormuz that pushes Brent oil prices to $200 per bbl, “central banks would consider it a severe growth shock, with stagflation, rendering monetary policy choices most difficult, although some may cut in response to a recession.”