As geopolitical tensions escalate in the Middle East, Thailand faces significant downside risks to its 2026 economic growth outlook. TRIS Rating has maintained a base-case GDP growth forecast of 2.1%, but a prolonged conflict could slash this growth to as low as 1.0%.
The severity of the impact hinges largely on the duration of the crisis; a three-month disruption (Scenario 1) might slow growth to 1.8%, while a six-month conflict (Scenario 2) presents a much bleaker economic trajectory at 1.0% growth. While these risks are significant, Tris Rating indicates the overall impact is expected to be less severe than the dual blow of the 2011 oil shock and major floods.
A primary concern for policymakers is Thailand’s heavy reliance on external energy, with 92% of its annual oil consumption imported and over half of that originating from the Middle East. A major disruption in the Strait of Hormuz, which handles 20% of global supplies, could drive Dubai crude prices to between $90 and $100 per barrel. This energy shock would likely trigger cost-push inflation, potentially reaching 4%–5% under the most stressed scenario. To mitigate these effects, the Thai government has implemented price controls on diesel and LPG while increasing mandatory oil reserves to approximately 100 days.
Beyond energy, the tourism sector faces unique challenges that may be more severe than previous geopolitical episodes due to the importance of Gulf region transit hubs. Higher jet fuel costs and rerouted flight paths are expected to drive up airfares by 10% to 20%, potentially reducing total tourist arrivals to 32 million. This is particularly impactful as long-haul visitors are currently a primary growth driver. Simultaneously, goods exports may falter due to a global economic slowdown and seaborne transport disruptions.
Regarding monetary policy, the policy interest rate is expected to remain steady at 1.0% to support the ongoing recovery. Analysts suggest that raising rates is less effective against cost-push inflation caused by supply shocks. Meanwhile, the Thai baht is projected to weaken moderately against a strong US dollar, potentially averaging between THB 32.5 and THB 33.0. Ultimately, while government interventions offer short-term relief, the longevity of the Middle East conflict remains the deciding factor for Thailand’s economic stability.
