The Philippine peso could weaken to a record low of P63 against the US dollar in the coming months as escalating tensions in the Middle East, a stronger greenback and seasonal import demand continue to pressure the local currency, according to Fitch Solutions unit BMI.

In a commentary released Friday, BMI said the peso is expected to trade within the P61 to P63 range in the near term before recovering modestly to end 2026 at P61 per dollar as global oil prices ease and remittance inflows strengthen toward year-end.

“A renewed escalation in the US-Iran conflict, US dollar firmness and seasonal peak in import demand will weigh on the peso in the near term,” the commentary read.

“Heightened geopolitical tensions and uncertainties surrounding global trade policy are likely to continue weighing on investment sentiment and deter investment inflows, limiting near-term upside for the peso,” BMI added.

The peso closed at P61.62 per dollar on July 16. The local currency slumped to an all-time low of P61.75 on May 18 and has reached record lows 11 separate times since the onset of the conflict in March. Before that, it traded at around the P57 level, ending February at P57.66 per dollar.

BMI cited the Philippines’ status as a net oil importer as a key reason for its heightened susceptibility to global energy prices.

“Renewed gains in global energy prices will further weigh on the peso by pushing up the import bill and widening the trade deficit. Recent data already reflect this impact,” BMI said.

The research firm also cited weak foreign direct investment (FDI) inflows as another headwind for the local currency. Net FDI inflows fell to $250 million in April, the lowest monthly level in nearly a decade since June 2016.

“FDI inflows will probably remain subdued given persistent geopolitical uncertainty, while higher effective US tariff rates on goods from the Philippines will likely weigh on export growth,” BMI said.

The report comes as the United States carried out new strikes against Iran this week while reimposing a naval blockade of the Strait of Hormuz, reigniting tensions in the Middle East and pushing Brent crude and West Texas Intermediate crude to four-week highs.

The firm added that the US dollar is expected to remain supported as financial markets continue to price in another 25-basis-point interest rate hike by the US Federal Reserve before year-end. However, despite its current weakness, BMI expects the peso to recover some ground toward the end of the year.

“Despite the bearish near-term outlook, we expect the peso to strengthen modestly by the end of 2026. Seasonal remittance inflows typically strengthen towards year-end, which will increase demand for the peso,” it said.

Looking ahead, BMI also downgraded its 2027 peso forecast to P60 per dollar from its previous estimate of P58.50, citing limited catalysts for a sustained appreciation of the local currency.