The Thai baht is projected to weaken to between 34 and 35 against the US dollar if the Middle East conflict persists for at least two months, potentially driving global oil prices above US$100 per barrel, according to Kasikorn Research Center (K-Research).
K-Research considers a prolonged two-month conflict as the most likely scenario. Under this outlook, crude oil prices are expected to exceed US$100 per barrel, placing downward pressure on the baht and increasing currency volatility, said Burin Adulwattana, the centre’s chief economist.
Mr Burin noted that the ongoing conflict has already significantly affected the baht, both in terms of volatility and depreciation. Since the start of the year, the currency has fluctuated by around 9%, compared with a range of 7.5–8% throughout last year. The baht has also weakened by approximately 4% against the US dollar, making it the second weakest currency in the region after the South Korean won.
Amid rising uncertainty, Thailand’s economic growth could decline by around 0.5 percentage points under this baseline scenario.
K-Research highlighted that the conflict has led to a sharp increase in global energy prices, particularly following disruptions to shipping routes through the Strait of Hormuz. This is expected to trigger ripple effects across the global economy, including petrochemical supply constraints and upward pressure on food prices in the coming months.
The situation has also disrupted trade and aviation activity in the region, resulting in fewer flights and higher travel costs.
On the financial side, a stronger US dollar against Asian currencies presents additional challenges for Thailand, given its heavy reliance on energy imports. This trend is expected to weigh on capital markets, the baht, and both global and domestic economic growth, while also accelerating inflation and raising the risk of stagflation.
“Stagflation would put pressure on central banks worldwide, including the Bank of Thailand, to delay interest rate cuts or limit monetary easing,” Mr Burin said.
Nattaporn Triratanasirikul, deputy managing director of K-Research, estimates that Thai economic growth could be reduced by 0.2 to 0.7 percentage points, bringing full-year growth to approximately 1.9%.
This projection assumes prolonged tensions involving Iran and potential supply disruptions in the Strait of Hormuz lasting between one and three months. Under such conditions, global oil prices are expected to remain above US$100 per barrel during that period, with the annual average for 2026 projected at US$75–90 per barrel.
In a worst-case scenario, if oil prices exceed US$130 per barrel for more than three months, Thailand’s headline inflation could surpass the Bank of Thailand’s 3% upper target, while economic growth in 2026 could stall.
“Inflationary pressures are already building in Thailand due to rising energy costs, while the broader impact on the real economy is expected to become more evident in the second quarter,” Ms Nattaporn said.
She added that the government’s capacity to subsidise energy prices is more limited than during the Russia-Ukraine conflict due to tighter fiscal conditions. While subsidies remain necessary, K-Research recommends a more targeted approach, focusing on specific groups, price levels and timeframes.