Economic analysts see possible faster inflation and moderate growth in consumption activities in the near term amid geopolitical tensions between Iran and Israel, joined by the world superpower United States.

Jonathan Ravelas, senior adviser at financial and tax consultancy firm Reyes Tacandong & Co., said prices of basic goods and services might rise as Iran retaliates against recent US-led bombings on the former’s three nuclear sites in Fordo, Natanz and Isfahan.

In coordination with Israeli officials, US President Donald Trump said the attacks were deployed successfully.

“This escalation raises concerns about potential disruptions in global oil supply, especially if the Strait of Hormuz, a critical shipping route, becomes a conflict zone or is compromised,” Ravelas said.

According to the Economic Research Institute for ASEAN and East Asia, the Philippines imports more than 80 percent of its crude from the Middle East.

“This would directly increase the cost of gasoline, diesel, and electricity in the country. Higher fuel costs typically lead to increased transportation and production expenses, which can drive up the prices of goods and services,” Ravelas said.

Bangko Sentral ng Pilipinas Deputy Governor Zeno Abenoja said overall inflation for this year might slow to 1.6 percent from 2.4 percent. He said main factors for the decline include higher production by the Organization of the Petroleum Exporting Countries and weaker global demand for fuels.

However, Abenoja said the outlook for next year and 2027 might reach 3.4 percent and 3.3 percent, respectively, as the armed conflict between the Middle Eastern countries persists.

“A surge in oil prices could widen the Philippines’ trade deficit, as the cost of imports rises. Sectors like manufacturing, logistics, and agriculture could be particularly affected,” Ravelas said.

Despite upticks in global oil prices, global investment bank Citi said their levels have remained lower, near $71 per barrel compared to the average price of $80 per barrel last year.

“That said, Citi’s base-case so far does not expect a major oil supply disruption which would further stretch the $10-$15/bl risk premia already embedded in Brent crude oil prices (which was at $75 per barrel at the time the premia were estimated),” the bank said.

Overall prices last month further declined to 1.3 percent from 2.9 percent in January, resulting in an average growth of 1.9 percent in the first five months, according to the Philippine Statistics Authority. All figures fell within the 2 to 4 percent target band of the Bangko Sentral ng Pilipinas (BSP).

Dovish monetary policy

Under a relatively stable global economy, Citi expects the BSP to deliver three more policy rate cuts this year until the first quarter of 2026. Citi said reductions might be announced in August and October this year.

BSP last Thursday eased its policy rate by 25 basis points to 5.25 percent after prices of rice, transport, and electricity fell last month.

If global oil prices climb toward $85 per barrel by the end of this year, Citi said the BSP will likely increase its overall inflation forecast by 30 basis points.

“While not necessarily derailing our expectation for an August cut given still currently high levels of real policy rates, it would increase the risk that our expectations for an October and first quarter of 2026 cut not materializing,” the private bank said.

Sub-target economic growth

HSBC Global Private Banking and Premier Wealth chief investment officer for Southeast Asia and India James Cheo sees the local economy expanding by 5.6 percent on average this year, slightly faster than the 5.4 percent recorded in the first quarter.