Thai industrial sentiment index falls amid Middle East tensions
FTI says March confidence fell to 88.6 as diesel, freight and raw material costs surged, while exporters faced new strain from Gulf market weakness
- The Thai Industries Sentiment Index fell to 88.6 in March 2026 from 90.0 in February, with the forecast for the next three months also declining.
- This drop is primarily attributed to Middle East tensions involving the U.S., Israel, and Iran, which have driven up energy prices and transport costs.
- The conflict has increased industrial production costs, raised freight rates, and negatively affected Thai exports to the region, particularly automobiles, air conditioners, and wood products.
- In addition to geopolitical tensions, the industrial sector faced rising domestic diesel prices and a shortage of raw materials like plastic resin and aluminium, further pressuring business operators.
Nava Chantanasurakon, vice chair of the Federation of Thai Industries (FTI), together with Bunchusa Putthapornmongkole, an FTI board member and vice chair for Economic and Academic Affairs, said the Thai Industries Sentiment Index for March 2026 stood at 88.6, down from 90.0 in February 2026.
The decline was caused by several factors, particularly the conflict involving the United States, Israel and Iran, as well as the closure of the Strait of Hormuz, which drove up energy prices and transport costs and put pressure on industrial production costs. It also affected exports to the Middle East, especially automobiles, air conditioners and wood products.
At the same time, diesel prices rose to THB40.74 per litre on March 31, 2026, up 36.07% from the previous month, increasing costs in the transport, agricultural and industrial sectors. Oil shortages also emerged at service stations in some areas, affecting local economic activity.
In addition, the industrial sector faced a shortage of raw materials, or a supply shock, including plastic resin, chemicals, packaging and aluminium, which pushed up production costs and forced operators to consider raising product prices. It also caused delays in transport and delivery processes.
Freight rates also increased due to tensions in the Middle East, particularly risk insurance premiums and surcharges, as well as cargo backlogs that could not be shipped to countries in the Persian Gulf, all of which added to operators’ cost burdens.
However, March also saw some supporting factors, including a tax exemption on the purchase of equipment and installation costs for solar power systems, effective from March 3, 2026, to December 31, 2028. The measure helped stimulate demand for solar products and energy storage systems.
In addition, trade fairs and sales promotion events such as the Bangkok International Motor Show 2026, held from March 25-April 5, 2026, and the 49th House and Condo Expo, held from March 19-22, 2026, are expected to help stimulate purchasing power in the automotive industry, construction materials and related businesses.
At the same time, measures to increase the biodiesel blending ratio for B7 and keep the price of E20 around THB5 per litre lower than E10 also helped support the biofuel supply chain.
The baht also weakened by 5.55% between February 27 and March 31, 2026, to 32.99 per US dollar, due to the strengthening US dollar and tensions in the Middle East, which benefited Thai exports.
From a survey of 1,311 respondents across 48 industry groups under the Federation of Thai Industries in March 2026, the factors causing greater concern were energy prices at 71.9%, the global economy at 69.8%, the domestic economy at 57.7% and lending interest rates at 21.4%. Concerns that eased were the exchange rate, particularly from the exporters’ perspective, at 43.8%, government policy at 33.6% and access to credit at 24.8%.
Meanwhile, the Industrial Sentiment Index forecast for the next three months stood at 95.9, down from 97.4 in February 2026, amid several key downward pressures.
Operators remain concerned that the conflict involving the United States, Israel and Iran could drag on, putting pressure on supply chains and logistics and affecting Thailand’s manufacturing and tourism sectors.
In addition, the automatic fuel tariff, or Ft, for the May-August 2026 period is expected to rise to about THB4 per unit, following the upward direction of energy prices, which would further increase energy costs for the industrial sector.
At the same time, slowing demand from trading partners in the Persian Gulf, particularly the United Arab Emirates and Saudi Arabia, could put pressure on Thai exports, especially in the automotive, food, air-conditioning, jewellery and wood-product sectors.
However, the government is preparing to introduce targeted measures to ease the impact of the energy crisis, to reduce business cost burdens and maintain the stability of the production sector going forward.
Recommendations to the government
The government should consider cutting fuel excise tax, alongside using the Oil Fuel Fund mechanism to support diesel prices, while also ensuring strict oversight to prevent oil hoarding or opportunistic price hikes, in order to reduce the impact on industrial costs, especially for SMEs and the transport sector.
The government should accelerate the promotion of energy-saving measures and support pool logistics, along with backhauling management, to reduce empty return trips and help lower transport costs.
The government should consider suspending exports of scrap steel, scrap aluminium and waste paper to preserve raw materials for domestic use, while accelerating the development of a domestic raw-material database and alternative raw-material sources, such as plastic resin, in the form of a dashboard to support raw-material management and reduce the impact of supply shocks.
