BECAUSE we have been so bogged down in politics and blame games, we never had the chance to look beyond our noses, and now we are caught with our pants down following the recent declaration of war and the following attacks by the United States and Israel on Iran. Our policy and economic think tanks should have seen this coming and, at least, prepared the country for this precarious global situation (the MNSA batch of my father correctly assessed and predicted the fall of the USSR during Ferdinand Marcos Sr.’s time, and the government prepared for it).
The geopolitical landscape shifted violently on Feb, 28, 2026, as a joint military operation by the US and Israel — codenamed Operation Epic Fury — targeted Iran. The strikes, which resulted in the deaths of Supreme Leader Ayatollah Ali Khamenei, some members of his family and dozens of top Iranian officials, have sent shockwaves around the world.
The Philippines, a nation deeply attached to the Middle East through its labor export and energy needs, will surely suffer both immediate and grave impacts.
The most pressing concern for the Philippine government is the safety of over 2 million overseas Filipino workers (OFWs) employed across the Middle East. While the Department of Foreign Affairs is scrambling and has reported no Filipino casualties as of March 1, the situation remains very volatile.
Lives have been disrupted. Flights bound for Riyadh and Doha have been diverted or forced back to Manila, leaving workers stranded and families in distress. With Iran retaliating against US military installations in Qatar, the United Arab Emirates and Saudi Arabia, the entire region has become a potential combat zone. Airlines all over the world that pass through the airspace of all protagonists have immediately rerouted or canceled flights to avoid being caught in the crossfire. The Philippine government has placed embassies on full alert, activating contingency plans to facilitate mass repatriations if the conflict escalates into a wider regional war.
Economically, the Philippines is uniquely vulnerable. As a net importer of oil, any disruption in the Strait of Hormuz — a critical choke point through which at least 20 percent of the world’s energy passes — threatens to destabilize the local economy.
Prior to this attack, the Philippine economy was struggling with a modest 4.4-percent growth rate from the previous year, missing the target of 5.5-6.5 percent. The sudden surge in global crude prices, with analysts warning of a spike toward $100 per barrel, poses a direct threat to domestic inflation. For the average Filipino, this translates to:
Higher transport costs: Immediate increases in gasoline and diesel pump prices. Successive price hikes will most certainly put great pressure on economic stability as the resulting corresponding increases in transportation, food and all consumer items come into play. As logistics costs rise, the price of basic commodities like rice and vegetables inevitably follows. I remember this week, tomatoes in Dagupan were reported to be disposed of along the roadsides due to oversupply. Now we need these, and they are gone.
Reduced purchasing power: A 10-percent shock in oil prices historically adds 0.3 to 0.4 percentage points to the national headline inflation, threatening to push it past the 4-percent threshold for 2026. The government will have its hands full addressing this looming certainty. And still, people are preoccupied with the 2028 elections.
Geopolitical pressures and sovereignty: Not meaning to be alarmist but beyond the balance sheet, the conflict places Manila in a delicate diplomatic position. The Philippines maintains a Mutual Defense Treaty with the US and hosts American forces under the Enhanced Defense Cooperation Agreement. If US bases in the Philippines are perceived as part of a global logistics chain supporting Middle Eastern operations, it could complicate regional relations and potentially invite security risks closer to home.
The 2026 attacks on Iran are not merely a distant military engagement; they are a domestic crisis for the Philippines. From the terrified families of OFWs in Tel Aviv and Tehran to the commuters in Manila facing rising fares, the ripples of this conflict are profound. The coming weeks will test the government’s ability to navigate a high-stakes humanitarian evacuation while shielding a fragile economy from a global energy shock.
In my simple mind, an immediate action plan must be put in place (yesterday!) to address the severe economic fallout.
We must swiftly deploy a combination of immediate fiscal relief, energy stabilization and long-term strategic shifts. With oil prices threatening to breach $100 per barrel and the Strait of Hormuz facing potential closure, the impact on inflation and domestic supply is critical. The following things should be considered:
Immediate fiscal relief and subsidies. The most direct way to shield the public from “pump shock” is through targeted government spending. This will not be easy on the heels of the forthcoming elections which preoccupy most of the population.
Triggering the fuel subsidy program. The “Pantawid” programs can be activated once Dubai crude averages $80 per barrel. For 2026, the administration has already earmarked approximately P2.5 billion for public utility vehicle drivers, and P600 million for farmers and fisherfolk to offset rising fuel costs. This is foreseen to fall short due to the sudden turn of global events.
VAT windfall reallocation. As fuel prices rise, the government collects more in value-added tax (VAT). Economists, including those in Congress, have proposed using this “windfall” revenue to fund additional social protection programs for the poorest 10 percent of the population who are most vulnerable to secondary price hikes in food and transport. If not done properly, the government will surely be facing more problems.
Energy security and supply management. As a net importer of oil, the Philippines must manage its physical reserves to prevent a domestic shortage. The Department of Energy mandates that oil companies maintain a 30-day supply of finished petroleum products. Ensuring strict compliance prevents panic-buying and provides a one-month buffer while the government seeks alternative suppliers outside the Middle East.
Diversifying energy sources. In the medium term, the war emphasizes the need to accelerate the transition to renewable energy. Increasing the share of solar, wind and geothermal power reduces the economy’s vulnerability to global crude fluctuations. Let us not sleep on this, please!
Food security and inflation control. Rising fuel costs lead to “second-round effects,” specifically higher food prices due to transport logistics. The Department of Trade and Industry should expect this and must take quick action, whether to control prices or implement subsidies, whichever they deem the correct approach.
Strengthening local supply chains. The 2026 budget has allocated a total of more than P280 billion to the Department of Agriculture and National Irrigation Administration. By strictly and properly utilizing these funds for postharvest facilities and direct transport support for farmers, the government can keep the price of staples like rice stable even as fuel costs rise.
Monetary policy adjustment. The Bangko Sentral ng Pilipinas (BSP) may need to pause planned interest rate cuts to combat inflationary pressures. By managing the money supply, the BSP can prevent a “wage-price spiral” where temporary oil spikes lead to permanent inflation.
Diplomatic and labor protection. We must also manage the “hidden” economic cost: the potential loss of remittances. Sadly, the country relies heavily on remittances from OFWs. This alone will result in a significant dent on fiscal revenues.
With over 2 million OFWs in the region, we must facilitate repatriations. Safely returning workers and reintegrating them into the local workforce through the Department of Migrant Workers is essential to prevent a sudden collapse in household incomes for millions of Filipino families. The war should serve as a wake-up call for the country to establish more and better-paying domestic livelihood and employment opportunities, with emphasis on increased wages but with quality service. It is time to not rely on OFWs too much.
