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ASEAN-6 asset markets continue to feel the heat from the Middle East conflict and the resulting energy supply shortages. The Thai Baht (-5.6%) and Philippine peso (-4.2%) have fared the worst amongst AxJ pack month-to-date (MTD), reflecting their vulnerability to imported fuel and passthrough risks to inflation. Degrees of impact have been varied, going beyond the energy complex to the fertiliser market, disrupting supplies, and posing upside risks to food inflation for the ASEAN-6 economies, if the conflict persists. The Middle East is a dominant global exporter of nitrogen-based fertilisers such as urea, accounting for 20-30% of the world’s share. In terms of direct impact, we assess that Thailand - a key agriculture producer - is the most vulnerable regionally. An overwhelming 50-70+% of Thai urea imports were sourced from the Middle East in 2024, compared with 10-20+% for Malaysia, Philippines, and Singapore, according to UN trade data. More concerning is the potential spillover from higher fertiliser costs (urea prices have jumped by 40% since the conflict) into agricultural commodity prices, as lower crop yields could eventually exert upward pressure on food inflation with a lag. By contrast, Indonesia is a net importer of fertiliser (China, Russia, and Canada are key sources), despite being a significant producer and exporter of urea. While the country has a strong domestic industry for nitrogen-based fertilisers (using natural gas), it imports phosphate and potash-based variants. The risk is also that higher fertiliser costs might strain farm margins further and influence planting decisions in the coming season, affecting the final crop mix.
Global food price pressures remain relatively contained at present. However, a concurrent surge alongside rising energy costs would pose a significant risk for Southeast Asia, effectively delivering a dual inflationary shock. Such a scenario would echo the synchronised, commodity-driven inflation spike observed in 2022. Add to this are dependencies on LPG supplies from West Asia. Food carries a significant weight in ASEAN-6’s consumer price index basket, at 20-36%, with Thailand, Vietnam, and Philippines the most vulnerable to accelerating food prices. While Singapore sits at the low end of this range, its status as a price taker, importing over 90% of its food requirements, leaves it exposed to international food price shocks, despite diversification across multiple sources. A resurgence of inflation threats would see regional central banks vigilant against broadening price pressures and second-round price effects, even as monetary policy is unable to fully alleviate supply-driven price shocks. Policymakers would possibly hold a neutral to slightly hawkish bias in the near term as they assess financial conditions amid still-fluid geopolitical dynamics. Thailand has borne the brunt of portfolio outflows this month (~$2.3bn MTD), in contrast with relatively more resilient Malaysian markets. Bonds will stay under pressure on the need for respective governments to provide fiscal support to affected industries and absorb the initial impact of higher global crude oil and LNG prices. 
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- Taiwan: Bias toward rate hikes 20 Mar 2026
- Japan: April rate hike likely off the table 20 Mar 2026