Inflation likely rose to 3.9 percent in March — up from 2.4 percent in February but still within the government’s target range — as the first-round effects of the Middle East conflict began to feed into the domestic economy, according to Bank of the Philippine Islands (BPI) Lead Economist and Senior Vice President Emilio S. Neri Jr.

In a statement, Neri said the month-on-month increase was driven by sustained price pressures carried over from February, as well as rising oil prices resulting from the conflict.

“Headline inflation likely accelerated to 3.9% [year-on-year] in March (from 2.4% in February), with [month on month] inflation estimated at 1.2%, reflecting a notable jump in price pressures driven by a sustained rise in rice prices along with a sharper-than-expected pass-through from oil,” he said.

“Food and utilities are reinforcing these cost-push pressures. Rice prices were already on an upward trajectory prior to the latest shock amid elevated import costs, logistics constraints, and tighter domestic supply. The recent surge in oil prices has only exacerbated this trend, accelerating MoM gains and reinforcing upside risks to food inflation,” added Neri.

February inflation had already marked a 0.6-percentage-point increase from end-2025 levels, driven by higher costs in housing, water, electricity, gas and other fuels, as well as food and non-alcoholic beverages, and restaurants and accommodation services.

Neri had earlier said BPI data projected inflation to reach 4 percent by April as global and domestic oil prices continue to surge, noting that Dubai crude has risen by 64 percent since the conflict’s escalation at the beginning of March.

“This has been accompanied by sharper increases in rice (4.7% MoM) and electricity tariffs (4.9% MoM), pushing monthly inflation to an estimated +1.2%,” he said, noting that the current Middle East conflict is “[transmitting] more forcefully” than the 2022 Russia-Ukraine conflict, a similar episode that drove oil prices higher.

A key difference between the two conflicts is the Strait of Hormuz — a critical global chokepoint that accounts for roughly 20 percent of the world’s oil supply — which has effectively been disrupted as the war continues. According to Neri, supply and shipping disruptions linked to the strait have pushed Dubai crude prices 64 percent higher from February to April, compared with a 22 percent increase during the 2022 Russia-Ukraine conflict.

Domestic pump prices have also risen since the conflict’s escalation, with Neri noting that Philippine gasoline prices have increased by 21 percent — a development with wide-ranging spillover effects.

“The surge in fuel prices is also beginning to transmit into higher transport costs, putting upward pressure on fare adjustments despite the government’s call to defer hikes. Fare increases tend to be sticky and non-linear, feeding into household inflation expectations, distribution costs, and eventually wage demands,” he said, adding that government initiatives such as the “Libreng Sakay” program, 50 percent fare discounts on LRT-2 and MRT-3 lines, and the “Piso RORo” project have “partly offset” some of the pressures.

Neri said full-year inflation could exceed 5 percent if oil prices remain above $90 per barrel for a prolonged period. This aligns with the Bangko Sentral ng Pilipinas (BSP)’ revised full-year inflation projection of 5.1 percent, reflecting the continued impact of the conflict on the domestic economy.

For its part, the central bank projects March inflation to settle within 3.1 to 3.9 percent.