Thailand on oil alert: ministers rush to crisis talks as Middle East war threatens fuel supplies and economy. Economists warn growth could crash to 0.7% if conflict drags on, while rising oil prices risk inflation, weaker exports and mounting subsidy costs.
Thailand is scrambling to ward off the threats posed by an extended Middle East war now taking shape as the United States and Israel continue attacks on Iran. On Monday, attention centred on the threat to shipping in the Strait of Hormuz. So far, the United States has shown restraint, avoiding attacks on Iranian tankers and holding back from striking the strategically vital Kharg Island, the centre of Iran’s oil exports. For Thailand, the stakes are high. On Monday, key economic agencies warned that a prolonged period of high oil prices and conflict could cut GDP growth to 0.7%. Meanwhile, the government is intensifying its search for oil supplies, with reports it is in talks with Russia.
Thailand’s top ministers met at Government House on Monday after 9 a.m. to discuss the country’s energy situation in light of the still raging and expanding Middle East conflicts following the US-Israeli attack on Iran on February 28th.
The meeting, chaired by Prime Minister Anutin Charnvirakul, included Minister of Transport Pipat Ratchakitprakarn, Minister of Finance Ekniti Nitithanpraphas, and Minister of Commerce Supajee Suthamphan.
The meeting came on the day when two key economic agencies warned about the threat posed by the conflict to the economy.
Thailand ministers meet over energy risks as Middle East conflict deepens after US-Israeli attack on Iran
Thailand’s economic outlook for 2026 now depends heavily on the course of the Middle East conflict involving the United States and Iran. On Monday, several respected economic agencies issued warnings about the risks facing the Thai economy.
Specifically, economists said the duration of the conflict will determine the scale of the economic impact. If the confrontation ends quickly, disruption may remain limited. However, if the fighting continues, economic damage could deepen across multiple sectors.
Both the University of the Thai Chamber of Commerce and KKP Research issued clear warnings. In particular, both institutions said a prolonged conflict could sharply slow Thailand’s economic growth. Consequently, analysts warned that GDP growth in 2026 could fall to only 0.7%. Such a level would bring the economy close to recession territory.
Meanwhile, KKP Research released an updated outlook from the research arm of Kiatnakin Phatra Bank. Notably, the report slightly improved its baseline forecast despite the growing risks.
KKP research raises Thailand’s GDP outlook to 1.8% but warns Middle East conflict threatens energy stability
Specifically, KKP Research raised its projection for Thailand’s 2026 GDP growth to 1.8%. Previously, the forecast stood at 1.6%.
The revision followed a stronger economic performance during the fourth quarter of 2025. As a result, the economy entered 2026 with slightly improved momentum.
However, analysts stressed that the Middle East conflict now represents a significant external risk. In particular, global energy prices remain the central concern.
Thailand remains highly vulnerable to energy price shocks. This vulnerability stems from the country’s heavy reliance on imported energy supplies. In fact, Thailand’s net energy imports account for roughly 6.5% of GDP.
Consequently, the country faces greater exposure than most economies in the region. Therefore, rising oil prices could affect Thailand through several economic channels. KKP Research identified three main transmission mechanisms.
First, economic growth would weaken. Higher energy prices would reduce tourism, exports and domestic consumption. As a result, businesses would face higher operating costs and weaker demand.
Rising oil prices expected to hit Thai inflation, trade balance and baht if Middle East conflict drags on
Second, inflation would rise. Energy prices carry substantial weight in Thailand’s consumer price basket.
Consequently, rising fuel costs would increase the cost of living for households. This would place pressure on household purchasing power and consumption.
Third, the external trade balance would deteriorate. Higher oil prices would increase the cost of imported energy.
As a result, Thailand’s trade surplus would shrink. Furthermore, the current account surplus would decline. Consequently, analysts expect downward pressure on the Thai baht under prolonged high energy prices.
Nevertheless, KKP Research’s base scenario assumes the conflict will remain temporary. Under that assumption, oil prices would eventually retreat. Specifically, analysts expect prices to return to around $60 to $70 per barrel.
However, this outcome depends on the conflict ending relatively soon. If fighting intensifies, the outlook could change rapidly.
In contrast, a wider regional war would produce a far more severe economic shock. Under such conditions, oil prices could remain elevated for an extended period. Accordingly, KKP Research outlined a high-risk scenario involving sustained price increases.
Thailand faces recession risk if oil exceeds $120 for six months, as the Middle East conflict escalates
If crude oil prices remain above $120 per barrel for six consecutive months, the consequences could be severe.
In that case, Thailand could face a technical recession. Economic growth could fall below 0.7%.
At the same time, inflation could climb to around 2%.
Despite these risks, the Thai economy had shown modest improvement before the conflict began. In fact, analysts identified three supporting factors.
First, tourism activity had begun recovering after a weakness in 2025. Previously, Chinese tourist arrivals declined sharply due to safety concerns. However, conditions improved during the Chinese New Year travel period.
During that period, Chinese travellers shifted their destination choices. Specifically, many tourists chose Thailand instead of Japan. This change followed rising tensions between China and Japan.
Consequently, Thailand experienced a modest rebound in Chinese visitor numbers. As a result, KKP Research revised its forecast for foreign tourist arrivals upward. The projection for 2026 now stands at 35.1 million visitors.
It appears to be particularly optimistic.
Tourism recovery broadens beyond Chinese market despite early 2026 decline in foreign arrivals
Importantly, the recovery extends beyond Chinese travellers alone. Visitors from ASEAN countries have also increased. Similarly, arrivals from Europe, India and Russia show encouraging trends.
Therefore, the tourism recovery now appears more diversified than in previous years. This trend reduces reliance on a single tourism market.
However, more recent figures reveal new pressure. Foreign tourist arrivals early in 2026 declined by 4%. Significantly, the decline occurred before the outbreak of the Middle East conflict.
Nevertheless, tourism operators remain concerned about long-haul travel demand. In particular, visitors from Europe and the Middle East could decline if tensions escalate.
Consequently, airlines and travel companies are closely monitoring developments.
Despite these concerns, KKP Research’s baseline projections remain relatively optimistic. The forecasts assume the conflict will end within the coming weeks.
Therefore, tourism demand could recover later in the year. However, the situation remains highly uncertain.
Electronics exports and HDD production support Thai manufacturing as supply chains reroute trade
Meanwhile, exports provided another source of economic support before the conflict. Export growth exceeded expectations in recent months.
In particular, the electronics sector drove much of the expansion. Hard disk drive production played a major role in manufacturing output.
Notably, hard disk drives generate higher domestic value compared with many other electronic products. Consequently, growth in this sector supports Thailand’s manufacturing base more strongly.
However, analysts caution that part of export growth reflects supply chain rerouting. In some cases, goods from other countries are routed through Thailand for re-export.
Therefore, export figures may partly reflect logistical shifts rather than domestic production growth. Nevertheless, the electronics sector remains an important driver of manufacturing activity.
Meanwhile, political developments also supported economic stability. Earlier, the Bhumjaithai Party formed a coalition government with the Pheu Thai Party. As a result, the risk of political instability declined significantly.
Political stability offers reform opportunity, but high household debt still weighs on Thai growth
Political stability, therefore, created an opportunity for economic policy initiatives. Specifically, the government can pursue long-delayed structural reforms. These include attracting foreign investment, improving productivity and negotiating new free trade agreements.
However, several structural challenges remain unresolved. For example, Thailand’s manufacturing sector faces competition from cheap imported goods.
Furthermore, household debt levels remain high. Consequently, domestic consumption remains constrained.
Commercial banks also maintain tight lending conditions. Therefore, credit growth remains limited across the economy. Without stronger credit expansion, domestic demand cannot grow significantly.
Meanwhile, the government faces mounting fiscal pressure from energy subsidies. Thailand continues to subsidise fuel prices through the Oil Fuel Fund.
Previously, the fund accumulated more than 120 billion baht in debt during the 2022 oil crisis. Only recently did the government begin reducing that burden. However, subsidies remain substantial.
Diesel subsidies and power price support strain Thai fiscal space as energy costs climb again
Currently, the government spends roughly 20 billion baht per month to maintain diesel prices. Specifically, the subsidy keeps the retail diesel price near 30 baht per litre. If global oil prices continue rising, the fiscal burden will increase further.
At the same time, electricity subsidies represent another concern. Between 2022 and 2023, electricity price support accumulated roughly 135 billion baht in obligations.
These liabilities remain owed to the Electricity Generating Authority of Thailand. If liquefied natural gas prices rise again, repayment could become more difficult.
Although these obligations are not formally classified as public debt, they remain government responsibilities. Consequently, they reduce the government’s available fiscal policy space.
Meanwhile, monetary policy may also shift. KKP Research observed a change in communication from the Bank of Thailand. Specifically, the Monetary Policy Committee has adopted a more balanced tone. Previously, the committee focused on preserving policy space during economic weakness. Now, however, it places greater emphasis on supporting economic growth.
Bank of Thailand signals policy shift as rate outlook pushed back and easing remains possible
Inflation remains relatively low at present. Meanwhile, the Thai baht has strengthened in recent months.
Even so, the central bank said current interest rates already support economic activity. Therefore, KKP Research expects the policy rate to remain around 1.0% during 2026 and 2027.
In addition, the expected timing of the next interest rate increase has shifted. Previously, analysts expected a rate hike in 2027. Now, however, the first increase is projected for 2028.
Nevertheless, the Monetary Policy Committee may reduce rates further if economic conditions worsen.
At the same time, the University of the Thai Chamber of Commerce issued its own economic warning. Economists focused particularly on the potential closure of the Strait of Hormuz.
The strait represents one of the world’s most critical shipping routes for energy supplies. Approximately 20% of global oil shipments pass through the narrow waterway. This represents roughly 20 million barrels of oil each day. Therefore, any disruption would quickly affect global energy markets.
University economists outline three war scenarios and major economic losses for Thailand.
The university’s Centre for Economic and Business Forecasting examined three potential conflict scenarios. Each scenario depends on the duration and intensity of the fighting. The first scenario assumes a short conflict lasting one month.
Under that assumption, crude oil prices would average about $90 per barrel. Meanwhile, natural gas prices would reach roughly $15 per MMBTU. Economists estimate this scenario carries a probability of 45%.
Under these conditions, Thailand’s energy costs would increase by roughly 23.3 billion baht. At the same time, export values would decline by around 32.5 billion baht. Tourism revenue would also fall by about 8.97 billion baht.
Altogether, total economic damage would reach roughly 64.8 billion baht. Consequently, GDP would decline by about 0.35%.
The second scenario assumes a regional conflict lasting three months. Under this scenario, the Strait of Hormuz remains partially closed. Oil prices would remain around $90 per barrel. Meanwhile, natural gas prices would rise to about $20 per MMBTU. Economists estimate this scenario also carries a probability of 45%.
Extended regional war could slash Thai GDP by over 1% as energy costs surge and exports fall
Under these conditions, Thailand’s energy costs would increase by roughly 80 billion baht. Export values would decline by about 97.5 billion baht. Tourism revenue would fall by approximately 20.8 billion baht.
Therefore, total economic losses would reach roughly 198 billion baht. Consequently, GDP would decline by about 1.07%.
The third scenario assumes a wider war lasting six months. Under that scenario, crude oil prices would rise to about $100 per barrel. Natural gas prices would remain near $20 per MMBTU.
Economists estimate this scenario carries a probability of about 10%. However, the economic damage would be much larger.
Energy costs would increase by roughly 202.9 billion baht. Exports would decline by about 195 billion baht. Tourism revenue would fall by around 29.3 billion baht.
Altogether, total economic losses would reach approximately 427 billion baht. Consequently, GDP would decline by about 2.31%.
Thai ministers hold urgent meeting as diesel price freeze ends amid escalating Middle East War
Meanwhile, the Thai government is confronting immediate policy decisions. A 15-day diesel price freeze expired on March 16.
Therefore, Prime Minister Anutin Charnvirakul convened an urgent meeting at Government House. He arrived shortly after 9 a.m. on Monday. Several senior ministers attended the discussions.
Participants included Deputy Prime Minister and Finance Minister Ekniti Nitithanpraphas. Transport Minister Pipat Ratchakitprakarn also joined the meeting. Commerce Minister Supajee Suthamphan attended as well.
In addition, Bank of Thailand Governor Vithai Rattanagorn participated. Senior officials from the National Economic and Social Development Council were present. Budget Bureau Director Anan Kaewkamnerd also attended.
Officials said the meeting addressed the emerging energy crisis. Specifically, discussions focused on the expiration of the diesel price freeze. In addition, ministers examined the fiscal and financial impact of rising energy prices.
Meanwhile, authorities attempted to reassure the public about fuel supplies. Deputy Prime Minister Ekniti Nitithanpraphas spoke after a meeting of the Centre for Monitoring and Managing the Conflict in the Middle East. The meeting reviewed Thailand’s domestic oil supply situation. Public concern had grown about possible shortages.
Oil companies say Thailand holds sufficient reserves, but transport disruptions trigger shortages
Therefore, officials invited major oil companies to provide information about reserves. Oil companies confirmed they hold sufficient supplies. According to officials, crude oil reserves can support refining operations for up to 96 days. Consequently, gasoline and diesel production can continue during that period.
However, officials acknowledged a separate logistical challenge. The current issue involves transporting fuel to petrol stations. Distribution delays could create temporary shortages in certain areas. Nevertheless, authorities said the problem can be resolved through better logistics management.
Meanwhile, fuel demand has recently increased. Normally, some industrial operators do not purchase fuel at retail stations. Recently, however, certain industries began purchasing fuel directly from petrol stations. Consequently, demand increased at retail locations. This surge contributed to public anxiety about shortages.
As a result, some consumers began stockpiling fuel. However, fuel retailers confirmed that national supply remains adequate. They said no nationwide shortage is expected. Therefore, authorities urged the public not to panic.
Fuel shortages reported locally as stations close and a popular temple struggles to buy gasoline
Officials also asked the Ministry of Energy to improve fuel distribution monitoring. Detailed data is needed to identify stations experiencing shortages. Such information would allow faster responses to local supply disruptions.
Despite these assurances, some incidents have already occurred. Over the weekend, petrol stations in Ayutthaya reportedly closed temporarily. Earlier, similar incidents were reported in Roi Et province. Authorities believe these closures resulted from distribution delays rather than depleted supply.
Meanwhile, another unusual consequence emerged. A well-known monastery in Nakhon Pathom reported difficulties purchasing gasoline. According to temple officials, insufficient fuel was available to conduct cremations. The report highlighted the growing anxiety surrounding fuel availability.
Last week, Thailand reportedly approached Australia for oil supplies, and later reports suggest that it was in talks with Russia. The situation appears to be tense despite claims by the Ministry of Energy last week that the country had a 98-day supply.
Global tensions rise as the US urges protection of the Strait of Hormuz and conflict costs mount
Meanwhile, global developments continue shaping the situation. On Monday, United States President Donald Trump called on other powers to protect the Strait of Hormuz. The strait remains a critical shipping route for global oil exports.
US Secretary of Commerce Scott Bessent also commented on the issue. He noted that the United States has allowed Iranian oil tankers to continue passing through the strait. Analysts continue to emphasise the route’s strategic importance.
Approximately 90% of China’s oil imports pass through the Strait of Hormuz. In contrast, only about 1% to 2% of US crude supplies depend on the route. Meanwhile, the conflict has already produced major financial costs.
The United States last week attacked military installations on Kharg Island, which is the centre of Iran’s oil industry and exports 1.5 million barrels a day. America is reported to be considering an attack on the oil facilities or even the occupation of the island.
Iran targets Gulf oil facilities as conflict widens and Thailand braces for economic shock
In the meantime, Iran has attempted to attack oil facilities in the United Arab Emirates, which clearly demonstrates its intent to disrupt oil supplies.
Estimates suggest the United States has spent roughly $17 billion since the fighting began. The conflict started on February 28. Currently, munitions and operational expenses approach $1 million per day.
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As the conflict continues, uncertainty remains high. Meanwhile, Thailand’s economic outlook remains closely tied to global energy prices. Fuel subsidies already cost the government roughly 1 billion baht per day. Consequently, authorities indicated domestic fuel prices may eventually float according to market conditions.
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Further reading:
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Visa waivers, discounted hotel stays and 2,000 baht a person per day for stranded tourists announced
Liquidity crisis or shortage of cash on the ground is shrinking Thailand’s economic growth prospects
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