During the past week, global attention focused on the ceasefire agreement between the US and Iran, bringing months of…

During the past week, global attention focused on the ceasefire agreement between the US and Iran, bringing months of protracted conflict to a halt.

While crude oil prices fell sharply in response to signs of progress towards peace, most businesses remain cautious, preferring to reassess the outlook once tangible results emerge and all trade restrictions have been fully removed.

The fragile Thai economy remains a concern, particularly when structural challenges have not been properly resolved, leaving low-income earners struggling with the surging cost of living.

STRUCTURAL CHALLENGES

Amonthep Chawla, executive vice-president and head of research at CIMB Thai Bank, said the recent decline in global oil prices could provide a much-needed boost to Thailand's economy by easing inflationary pressures, supporting household spending, and lowering costs for businesses and the tourism sector.

Oil prices, which surged above US$100 per barrel and briefly approached $120 during the war and closure of the vital shipping lane in the Strait of Hormuz, have since retreated to less than $80 following signs of progress towards a peace agreement.

The downtrend could continue in the coming months, settling in a range of $75-80 per barrel in the third quarter as global oil supply increases and concerns over supply disruptions ease, said Mr Amonthep.

"For Thailand, which is a net oil importer, lower oil prices are generally good news," he said. "They help reduce inflationary pressure and prevent a sharp rise in the cost of living."

The moderation in energy prices is also likely to ease concerns among central banks that have been focused on inflation risks. Following meetings of the US Federal Reserve and Bank of Japan last week, investors will be closely watching policymakers' projections for future rate cuts and their assessment of economic conditions.

Closer to home, the Bank of Thailand has a policy meeting this week and investors will look not only at the rate decision, but also whether policymakers vote unanimously and how they communicate their outlook on inflation and economic growth, said Mr Amonthep.

"Earlier concerns that inflation could climb to between 3% and 5% were largely driven by supply-side shocks and elevated energy prices. With oil prices now falling back to pre-conflict levels, those fears have begun to subside," he noted. "If oil prices continue to decline, inflation will likely ease further, reducing the need for tighter monetary policy."

The benefits of lower energy costs could extend beyond inflation. Businesses may gain some relief from lower operating expenses, while consumers could see improved purchasing power if domestic fuel prices follow global trends downward.

The tourism industry, a pillar of Thailand's economy, may also benefit. Lower fuel costs could reduce airline expenses and help support travel demand at a time when tourist arrivals remain below expectations.

However, Mr Amonthep cautioned that lower oil prices alone will not solve Thailand's broader economic challenges.

"Even if the impact of the conflict fades and oil prices return to normal levels, Thailand's economy still faces structural issues," he said. "Economic growth remains weak, purchasing power among lower-income households is fragile, and various risks continue to weigh on the outlook."

As a consequence, government support remains essential to sustain economic momentum and help households cope with living costs, said Mr Amonthep. While the decline in oil prices is expected to provide short-term relief, policymakers need to address underlying weaknesses in the economy to ensure a stronger and more sustainable recovery, he noted.

IMPLEMENTATION KEY

Dhanakorn Kasetrsuwan, chairman of the Thai National Shippers' Council (TNSC), said the peace agreement between the US and Iran is a significant step forward for the global economy, trade and the maritime shipping industry. The agreement should help reduce tensions in the Middle East, which is one of the world's most strategically vital regions for logistics, he noted.

However, exporters and maritime transport operators said it is too early to expect a rapid return to normal shipping conditions through the Strait of Hormuz, even if the agreement is finalised.

The implementation process is likely to proceed in phases, with a focus on enhanced security protocols, mine clearance operations, thorough shipping route inspections, and comprehensive risk assessments by insurers and shipping companies.

According to the TNSC, if all parties adhere to the agreement, cargo transport through the Strait of Hormuz could gradually resume within 1-2 months following the signing. However, a return to normal operations may take longer as global shipping lines and logistics providers have to closely monitor regional stability before fully restoring regular services.

In the short term, Mr Dhanakorn said importers and exporters will continue to face several challenges. War risk surcharges remain high and are unlikely to decrease until there is clear, sustained evidence of the agreement's effective implementation.

Confidence among shipping providers is fragile, with many carriers maintaining strict risk management measures in response to recent attacks on commercial vessels in the region. In addition, imbalances in the availability of containers and transport equipment persist.

"The crisis altered shipping routes and reduced services in some areas, disrupting the allocation of containers and vessel capacity. These issues cannot be resolved immediately," he said.

There is also a risk of congestion in the early stages of recovery, particularly if many exporters and importers simultaneously resume shipments to Middle Eastern markets as conditions improve. Such a surge in demand could place upward pressure on freight rates in the short term, said Mr Dhanakorn.

"Major ports in the Persian Gulf, including Jebel Ali, Dammam, Doha and Kuwait, could face congestion as vessel arrivals and cargo volumes increase rapidly. As a result, freight rates on Middle Eastern routes may remain firm or temporarily rise before gradually returning to equilibrium as shipping services and global supply chains normalise," he said.

Furthermore, energy prices and transport costs remain highly sensitive to the progress of negotiations and political stability in the region.

"The TNSC views the ceasefire as a long-awaited positive development for global markets. However, the true measure of success will be the consistent implementation of its terms and the maintenance of long-term regional stability," said Mr Dhanakorn. "Ongoing developments involving Israel, Lebanon, and other groups in the Middle East remain key factors that could impact the sustainability of any peace arrangement."

If the sides cannot agree on a peace deal, oil prices are likely to remain highly volatile and could rise further if oil exports or regional shipping activities are disrupted, he noted.

War risk insurance premiums would stay elevated, with the possibility of additional surcharges in affected areas. Shipping lines would continue to enforce strict risk management measures, including limiting voyages or rerouting vessels, according to the TNSC.

Higher bunker fuel and transport costs would be passed on to importers and exporters, with freight rates likely to remain above normal levels or rise further, particularly on routes linking the Middle East, Europe and Africa, noted the council.

"The most critical factor this year is whether all parties can keep their commitments and meaningfully reduce regional tensions. Confidence in these efforts will shape the direction of oil prices, logistics costs, insurance premiums and freight rates in the months ahead," Mr Dhanakorn said.

If a peace agreement does not materialise, or if tensions in the Middle East persist, he said Thai exporters and logistics operators are prepared to manage these uncertainties. In recent years, businesses have continually adapted to disruptions caused by wars, geopolitical conflicts, and global supply chain challenges, said Mr Dhanakorn.

"Exporters now prioritise cost control and risk management, such as securing vessel space in advance, managing inventory more efficiently, diversifying export markets, and preparing alternative transport plans in case of further disruptions to shipping routes or international logistics networks," he said.

GRADUAL RECOVERY

If the ceasefire paves the way for the end of war in Iran, the oil and gas market should take at least six months to recover, said Pimjai Leeissaranukul, chairwoman of the Federation of Thai Industries (FTI).

"The energy situation should improve by early next year," she said.

Energy prices will not fall rapidly over the next six months as oil production and refinery facilities were affected by the war, said Mrs Pimjai.

Amid ongoing energy volatility, she called on the government to maintain its oil price subsidy for the transport sector, with aid directed at groups most in need.

Manufacturers must rein in energy costs, while households are urged to stay vigilant on conservation, said Mrs Pimjai.

Panitarn Pavarolavidya, secretary-general of the FTI, urged consideration of alternative scenarios should the peace agreement encounter obstacles and fail to materialise.

"Don't forget, US President Donald Trump can shift his mood within 24 hours," he said, warning that such swings could quickly alter Washington's policy on Middle East conflicts. "This morning I woke up to see whether Trump changed his mind."

STILL CAUTIOUS

Nattaporn Triratanasirikul, deputy managing director of Kasikorn Research Center (K-Research), said even if the US and Iran reach a peace agreement, the terms and conditions must be studied to determine whether both sides can comply.

Uncertainties will likely remain elevated, affecting global asset prices including energy, and are unlikely to decline rapidly, she said.

The ceasefire gives the US and Iran 60 days to negotiate a permanent end to the conflict and a resolution to issues surrounding Iran's nuclear programme. Both parties must be willing to accept the conditions set by the other side. In particular, the US is demanding Iran halt uranium enrichment, while Iran is calling for the removal of US sanctions and the release of its frozen assets.

"The conditions set by each side appear difficult for the other to accept, so the situation needs to be monitored," said Ms Nattaporn.

K-Research forecasts the US may soften its stance on several issues, partly due to the midterm elections. The US appears eager to prevent further escalation before the elections to minimise political repercussions.

Somruedi Banchongduang