The Philippines is beginning to show signs of fiscal strain as global oil prices climb, though the nation maintains substantial foreign exchange reserves to weather potential currency volatility, according to ING Groep NV.

In a research note released on Wednesday, March 11, the Dutch lender warned that the escalating conflict in the Middle East will have an uneven impact across Asian markets.

Analysts identified the Philippines, Thailand, and South Korea as the economies most likely to sustain “bruises” from the geopolitical friction in oil-exporting regions.

“Higher oil prices will hit Asia unevenly, with Thailand, the Philippines, and Korea likely to feel the strain first, due to weak buffers, fast pass-through, and heavy import dependence, respectively,” said Deepali Bhargava, ING regional head of research for Asia-Pacific.

However, relative to its regional peers, such as Thailand or Indonesia, the Philippines is “likely to feel higher oil prices sooner.” Bhargava attributed this vulnerability to the country’s modest fuel buffers, fast price pass-through, and wider current account deficit.

Bhargava said a prolonged rise in crude oil prices has serious implications for the Philippines as an oil-dependent economy.

A major sign of strain is already visible, Bhargava said, citing the shift by local governments and government agencies across the country to a four-day workweek to address the recent surge in fuel and petroleum product costs.

Based on ING’s monitoring, the Philippines has already hiked fuel prices by up to 13 percent since March 2, reflecting an intentional decision to allow “earlier pass-through.”

Notably, the Philippines’ and Indonesia’s fuel reserves are assessed to be thin or quickly exhausted. Bhargava said market risks in these economies are acute, especially when thin reserves are compounded by widening current account deficits.

Under the assumption of stable demand, the economist said a $15-per-barrel (bbl) increase in Brent crude could widen the Philippines’ current account deficit by around 0.7 percent of its output, as measured by gross domestic product (GDP).

“We are increasing our current account deficit forecast for the Philippines to four percent of GDP in 2026,” Bhargava said.

Such an expected widening raises the risk of the peso slipping against the United States (US) dollar, especially against the backdrop of a persistent surge in oil prices.

Additionally, ING estimates showed that if oil disruptions persist for a month, local inflation could soar close to four percent, the upper end of the Bangko Sentral ng Pilipinas’ (BSP) target band of two to four percent—a price movement deemed manageable and conducive to economic growth.

As price swings are expected to occur imminently, Bhargava said ING “no longer expects the BSP to cut rates this year.” The BSP has so far brought the benchmark rate down to 4.25 percent, after which the central bank has turned more hawkish.

While forex reserve adequacy is a concern for other economies, ING said the Philippines and India “maintain stronger forex buffers, giving their central banks greater capacity to manage currency pressures if oil-related outflows intensify.”

To recall, fresh gains in gold reserves lifted the Philippines’ GIR to a record high last year, expanding to $110.9 billion at end-2025. Gold reserves stood at $18.6 billion, posting a new record level since 2000.