NESDC warns Middle East conflict could hit five Thai economic fronts

The National Economic and Social Development Council (NESDC) has warned that a prolonged conflict in the Middle East could affect Thailand through five major economic channels, led by energy prices, production costs, trade, tourism and financial-market volatility.

In its report on Thailand’s economic performance in the first quarter of 2026 and the outlook for the full year, the NESDC said the conflict could pose a growing risk to energy security, particularly for countries that rely heavily on energy imports from the Middle East.

Higher energy and commodity prices, including fertiliser, petrochemical products and plastics, have risen to multi-year highs in several countries, including Thailand. Such volatility has increased pressure on production costs in both the agricultural and industrial sectors and could further fuel inflation.

The NESDC identified five key areas through which the impact could be transmitted to the Thai economy: energy supply and prices, production supply chains, international trade, tourism, and money and capital markets.

Energy prices under pressure

The degree of energy impact varies from country to country, depending partly on the level of reliance on imports from the Middle East. Asian economies, including Thailand, have a relatively high dependence on energy from the region.

Thailand imported 46.8% of its energy from the Middle East in 2025, including 59% of total crude-oil imports and 24.3% of total natural-gas imports.

Rising global oil prices have placed upward pressure on refined oil prices in Thailand, although the government initially moved to cap domestic energy prices to ease the impact.

The NESDC said Thailand’s household demand was likely to be more affected than that of other economies in the region because energy accounts for about 14% of Thailand’s consumer price index, the highest share in the region.

Higher oil costs could also feed through to production sectors with a high share of oil-related costs, including fisheries, mining and quarrying, chemicals, electricity and water supply, and basic metals. Other affected sectors include chemical fertiliser production, construction, wholesale trade, concrete products and cement.

These sectors could face higher production costs, which may eventually be passed on to consumers through higher goods and service prices, the agency said.

Petrochemical supply chains face risk

The Middle East situation could also affect other raw materials that Thailand imports heavily from the region, especially oil and natural gas-based products.

Thailand imports 90.20% of its naphtha from the Middle East, along with propane, ethylene, propylene and helium. A shortage of these inputs would severely affect both the industrial and agricultural sectors.

The manufacturing industries most directly exposed are those that rely heavily on petroleum and petrochemical products as core raw materials.

Fertiliser stocks may last only until August

The agricultural sector also faces risks from possible shortages of raw materials used to produce chemical fertilisers, as well as rising prices for fertilisers and pesticides.

Thailand imports 71.4% of its urea fertiliser from the Middle East. The country also relies on imports for 40.84% of its fertilisers and pesticides.

As of mid-March 2026, Thailand had around 6.5 million sacks of urea fertiliser in stock, or about 0.32 million tonnes. With additional imports of about 2 million sacks, or 0.10 million tonnes, in April 2026, total remaining stocks stood at around 8.5 million sacks, or 0.42 million tonnes.

The NESDC said this would be sufficient only until the end of August 2026.

Trade and exports could weaken

Thailand’s exports to the Middle East stood at US$339.63 billion, accounting for 3.7% of the country’s total exports in 2025. Key export products to the region in March 2026 included vehicles, equipment and parts, which made up the largest share at 35.4%, followed by gems and jewellery, and air conditioners and parts.

Imports from the Middle East stood at US$344.94 billion, accounting for 8.1% of Thailand’s total imports last year. Major imported items included jewellery, gems, silver bars, gold, crude oil and natural gas.

If the conflict becomes prolonged, Thai exports could be affected by weaker purchasing power in export markets.

Middle East tourists decline

Tourists from the Middle East accounted for 3.7% of all foreign arrivals in Thailand in 2025. The NESDC noted that visitors from the region are generally high-spending travellers.

However, arrivals from the Middle East fell to 32,815 in March 2026 and 45,990 in April 2026.

Revenue from Middle Eastern tourists in the first quarter of 2026 stood at 17.6 billion baht, or 3.87% of total foreign-tourism revenue, down 6.4%.

Financial markets may tighten

The NESDC said the conflict had also increased volatility in money and capital markets, prompting investors to shift towards lower-risk assets, particularly US dollar-denominated assets. This has strengthened the US dollar.

Most stock-market indices have declined as investors moved away from risk assets. Government bond yields have also risen due to inflation concerns, increasing public borrowing costs.

The agency said this could reduce fiscal policy space in many countries, including Thailand.

At the same time, faster inflation could push major central banks to maintain tighter monetary policy or keep interest rates high for longer. This trend could further tighten financial conditions and put pressure on markets that are sensitive to investor sentiment.

Emerging markets, in particular, could face currency depreciation, capital outflows and higher borrowing costs.

The NESDC said countries likely to suffer the heaviest impact from a prolonged conflict would be those with weak economic stability and limited fiscal space.

Economies with weaker external stability could face capital outflows that affect exchange-rate stability, including Malaysia and Vietnam. Countries with limited fiscal space, including Thailand, Malaysia and the Philippines, may also face tighter constraints in responding to the fallout.