The Oil Fuel Fund Committee of Thailand has approved a retail fuel price hike of 6 baht per liter, effective March 26, 2026, as global oil prices surge amid heightened tensions in the Middle East.
This move comes alongside a reduction in subsidies from the Oil Fuel Fund, which remains in a negative financial position of over 35 billion baht and faces daily compensation costs of about 2.59 billion baht. As a result, diesel prices are expected to reach approximately 38.94 baht per liter. The government is preparing relief measures for vulnerable groups, transport, and agricultural sectors to mitigate the cost of living impacts.
Past data, such as the aftermath of the Ukraine-Russia war, showed that soaring diesel prices raised Thailand’s headline CPI to a peak of 7.7% in 2Q22, before easing later that year. However, Kasikorn Strategy analysts do not expect comparable inflationary pressure this time, citing lower global shortages and weaker demand-pull factors. The current CPI is projected to gradually recover from -0.88% to between 1.3% and 1.5%.
Sector Impact Analysis:
- Transport: Every 10% rise in oil prices could decrease expressway usage by up to 3%, impacting BEM and DMT’s 2026 core profits by about 6% and 5%, respectively.
- Financial: Historical sensitivity analysis indicates that each 1-baht diesel price increase could reduce finance sector price targets by roughly 3%. With diesel prices increasing to 39 baht, target prices for major finance stocks like MTC, TIDLOR, and SAWAD are expected to decline considerably. Despite near-term negative sentiment, analysts point to long-term accumulation opportunities, especially for MTC and TIDLOR, which maintain healthy coverage ratios. Transport operators, particularly trucking companies, are advised to remain cautious.
Analysts also emphasize the importance of monitoring government measures for vulnerable sectors, which could soften the overall financial impact.
Retail Oil Sector:
The price hike is a slight positive for retail oil groups as it enables retail prices to reflect actual crude oil costs, reducing the subsidy burden. However, 1Q26 earnings for retail oil companies are expected to drop both year-on-year and quarter-on-quarter due to thinner margins and limited inventory gains.
Historically, similar price liberalizations in countries like Vietnam have led to short-term stock market declines. In Thailand, when inflation has rebounded in the past 22 years, Healthcare, ICT, and Property sectors have generally outperformed, with Healthcare showing resilience to diesel price changes thanks to high EBIT margins.
The immediate impact of rising oil prices is expected to be negative for transport, logistics, retail, finance, and domestic consumption sectors due to increased costs and pressure on purchasing power. Oil retail stocks may see short-term positive sentiment, but defensive sectors with limited downside risk, such as Healthcare (e.g., BCH) and Banks (e.g., KTB), remain preferred.
