“Our model-based estimates tell us that USD/PHP could range between 59.00-60.00 in a scenario of $90/bbl oil prices, and between 60.00-61.00 with US$100/bbl oil prices, especially if this is coupled with a hawkish Fed. Of course, 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 PHP,” Mitsubishi UFJ Financial Group (MUFG) said.
THE PESO WILL depreciate to P61 against the dollar if global oil prices continue to hover above $100 per barrel (bbl) and the US and Philippine central banks hike key interest rates, according to the Mitsubishi UFJ Financial Group (MUFG).
In a reported titled “Philippines – Strait of Hormuz closure: Impact of higher oil prices and more” released last week, MUFG said that the Philippine peso is vulnerable to the shocks of the current Middle East Crisis, which started last February 28 after the United States and Israel launched joint attacks on Iran.
On Friday, the local currency again ended weaker against the US dollar after finishing the day at 59.38 from 59.17 on Thursday.
“We see the Philippines peso (PHP) as vulnerable and USD/PHP possibly rising above the 60 levels if the Iran and Middle East conflict is sustained and the Strait of Hormuz remains closed, with oil prices already reaching above $100/bbl (barrels of oil) at the time of writing,” MUFG said.
“While we do not yet know how the Iran and Middle East conflict will play out from here, it’s important to stress our current base case USD/PHP forecast of 58.00 by 4Q2026 (fourth quarter 2026) assumes a resolution after March 2026 and implicitly for oil prices to fall towards the $70/bbl levels,” it added.
MUFG added that the US Federal Reserve and the Bangko Sentral ng Pilipinas (BSP) taking a hawkish stance on interest rates can push the peso to trade at P60-P61 against the dollar.
In an interview with Bloomberg, BSP Governor Eli Remolona said the rising global oil prices can prompt them to raise interest rates. To recall, the Monetary Board of the BSP on February 18, 2026 reduced its key policy rate (Target Reverse Repurchase Rate) by 25 basis points to4.25 percent.
“Our model-based estimates tell us that USD/PHP could range between 59.00-60.00 in a scenario of $90/bbl oil prices, and between 60.00-61.00 with $100/bbl oil prices, especially if this is coupled with a hawkish Fed. Of course, 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 PHP,” MUFG said.
Global price outlook
Meanwhile, global oil prices almost reached $120/bbl a few days after the Middle East conflict started, but eased to below $100/bbl recently.
“Oil prices have gyrated wildly since the United States and Israel launched joint air strikes on Iran on 28 February. Disruptions to Middle Eastern supplies due to attacks on the region’s oil infrastructure and the cessation of tanker traffic through the Strait of Hormuz sent Brent futures soaring, trading within a whisker of $120/bbl. Prices subsequently eased with Brent around $92/bbl at the time of writing – up $20/bbl for the month,” the International Energy Agency (IEA) said in a post last Friday.
At the local front, diesel prices may breach the P100 per liter this week, and petrol above P80 per liter depending on the source of fuel.
The Philippines imports 90 percent of the oil requirements, mostly in finished products like fuel.
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