Rising oil prices—approaching $100 per barrel—have highlighted Thailand’s heavy reliance on Middle Eastern energy, which supplies nearly half of its oil and gas. This comes as the country faces mounting fiscal pressure, with public debt nearing its 70% ceiling and an economy that was already in deflation before the conflict.
After renewed optimism earlier this year, foreign inflows quickly reversed. Investors bought $1.7 billion in Thai stocks in February, but the outbreak of war led to sharp outflows in March, including $823 million in equities and $705 million in bonds.
Although a temporary ceasefire has lifted markets and the baht, analysts remain cautious. Elevated energy costs could weigh on consumption, exports, and tourism—key pillars of Thailand’s economy—while limiting policy flexibility.
Thailand’s economic growth remains weak, expanding just 2.4% last year, while inflation dynamics have shifted sharply due to rising energy prices. With limited room for monetary easing or tightening, policymakers face a difficult balancing act.
The baht has weakened since the conflict began, acting as a pressure valve, while fiscal constraints limit the government’s ability to introduce subsidies or stimulus measures.
Analysts warn that if the energy shock persists, it could further disrupt economic activity and deepen Thailand’s challenges in the months ahead.